California sales tax

Our Tax Attorneys Have Good News if you Didn’t Apply for a PPP Loan by the Deadline of June 30, 2020.

July 7, 2020 | by Dennis N. Brager

PPP Loans are an excellent way for small businesses with Covid-19 related financial issues to obtain a very low (one percent) interest loan from the government. Unfortunately, if you haven’t applied yet the time period for submitting an application expired on June 30^th. The good news is that the Senate and the House have passed a bill which extends the deadline to apply to August 8, 2020. President Trump signed the bill into law on July 4, 2020. While it seems that large businesses are the usual recipients of government money, this program reaches the smallest of businesses.

At the time of this writing it appears that there was still about $130 billion in loans still available. With an average loan size (the precise number keeps changing) of about $110,000 that means that up to about another 1.2 million businesses could take advantage of the PPP loan program.

If handled properly, the loan will be forgiven by the government. Therefore, it is essentially a grant by the government. When the loan is forgiven there will no discharge of debt income to take into account. However, businesses will be unable to deduct expenses paid with the forgiven loans on their income tax returns.

SBA Publishes Loan Forgiveness Form and Instructions for PPP Loans

May 18, 2020 | by Dennis N. Brager

Most, if not all, Payroll Protection Program (PPP) borrowers are focused on the question of whether they will be able to have their PPP loan forgiven. Many questions have arisen, and some but not all, have been answered by the Loan Forgiveness Application and instructions released by the SBA on Friday, May 15, 2020. Here are some of the highlights.

Annual “cash” payroll costs are capped at $100,000 per employee. While this is not news, the SBA calculates that this amount on a pro-rata basis for the 8 week “Covered Period” is $15,385. If you do the math, that is equal to 8 weeks per year divided by 52 weeks multiplied by $100,000. Some were hoping that those on a semi-monthly pay schedule could use a larger amount based upon 24 pay periods per year. Apparently not.
Alternative Payroll Covered Period. The Covered Period is generally eight weeks (actually 56 days) beginning on the date the loan is first funded. The Alternative Payroll Covered Period is only for employers with bi-weekly or more frequent payroll schedules. Therefore, it doesn’t appear to apply to employers who pay semi-monthly. It begins on the on the first day of the first payroll period following the PPP Loan Disbursement Date and ends 56 days later. The following example is provided: Alternative Payroll Covered Period: “… if the Borrower received its PPP loan proceeds on Monday, April 20, and the first day of its first pay period following its PPP loan disbursement is Sunday, April 26, the first day of the Alternative Payroll Covered Period is April 26 and the last day of the Alternative Payroll Covered Period is Saturday, June 20.” This suggests that one cannot include payments for a payroll period that begins before the PPP Loan Disbursement Date but is paid after that date. However, that is inconsistent with the Press Release issued concurrently by the SBA which states that the form and instructions provide “Flexibility to include eligible payroll and non-payroll expenses paid OR incurred during the eight-week period after receiving their PPP loan.” (emphasis supplied). See more below.

Not Just Another Covid-19 Announcement

March 17, 2020 | by Dennis N. Brager

Some of you may be concerned about the impact of the Coronavirus aka Covid-19 outbreak on your taxes, and those of your clients. The news from the IRS has been slow in coming. On Friday of last week President Trump declared a National Emergency. At the same time, he directed Treasury Secretary Mnuchin to provide relief from “tax deadlines” to Americans who are adversely impacted by the emergency. This allows the IRS to extend various deadlines for up to a one-year period. This authority is not, however, self-executing. That is, the IRS must specify exactly which due dates, and for how long they are being extended.

Prior to President Trump’s announcement Secretary Mnuchin had told reporters that most deadlines would be extended for “small businesses” and most individuals other than the “super rich.” Our tax lawyers couldn’t find a definition of super rich anywhere in the Internal Revenue Code. Finally, this morning, Tuesday March 17^th, after partnership and certain LLC returns were already due, Mnuchin stated in a press conference that the filing deadline for the 2019 income tax return would be extended by 90 days. For individuals that would mean July 14^th. Presumably, the IRS will actually extend the date to July 15^th just to make things a touch easier. Individuals living overseas already have an extension to June 15^th so presumably they would have until September 15^th to file.

In addition to stating that the income tax filing deadline would be extended, Mnuchin also stated that the 2019 payment deadline for income taxes owed of less than $1 million dollars for individuals or $10 million for corporations. This would be an interest and penalty free extension. For those who are over the thresholds it is unclear whether the entire amount due would be subject to interest and penalties or just that amount over the threshold. It is also not clear whether the filing extension would apply to those who owe taxes in excess of the cut-off amount.

How to Pursue Settlement with the Board of Equalization

August 15, 2017 | by Dennis N. Brager

If the Board of Equalization (BOE) conducts a sales and use tax audit on your business, you may face a sales tax liability of tens of thousands of dollars or more. To make matters worse, the BOE can share information with the California Franchise Tax Board and the IRS, resulting in more tax assessments, penalties, and interest due to delinquent state and federal income tax debt.

Settlements with BOE Tax Auditors

You (along with your tax attorney) can first attempt to settle your outstanding sales tax debt with the BOE auditor and/or his supervisor. This can occur during an exit conference following an audit. If you are unable to reach a satisfactory settlement, you can ask to meet with the BOE Principal District Auditor to discuss your case.

What Will an Auditor Look for in a California Sales Tax Audit?

March 2, 2017 | by Dennis N. Brager

A California sales tax audit is conducted by the California State Board of Equalization (BOE). The objective of the audit is to determine if you have paid the correct amount of sales taxes.

The main question the auditor is attempting to answer is: Did you report all gross receipts from sales of taxable personable property? Businesses that have cash transactions are often targeted for sales tax audits. You are required to provide records during the audit process.

How an Auditor Looks for Sales Tax Problems