CPA news to know: PPP vigilance and the start of tax season

Paycheck Protection Program (PPP) loans and the start of tax season are two topics squarely on the minds of CPAs these days. This episode analyzes the Jan. 25 update by the U.S. Small Business Administration (SBA) about processing second-draw loan applications and looks at what recent IRS announcements mean for tax season. Kari Hipsak, CPA, CGMA, a senior manager at the Association of International Certified Professional Accountants, and Alistair Nevius, J.D., the JofA’s editor-in-chief, tax, are the guests for this quick look at recent news that affects the accounting profession.

What you’ll learn from this episode:

• Why PPP loan applicants should be patient and vigilant.
• The practical applications of the SBA’s recent update.
• A preview of the JofA’s February print issue.
• What the announced date that the IRS begins accepting tax returns means for practitioners and filers.
• Effects of the Consolidated Appropriations Act, 2021 (CAA), P.L. 116-260, on tax season.

Play the episode below:

Accounting firms can prepare and process applications for the PPP on the CPA Business Funding Portal, created by the AICPA, CPA.com, and fintech partner Biz2Credit.

AICPA experts discuss the latest on the PPP and other small business aid programs during a biweekly virtual town hall. The webcasts, which provide CPE credit, are free to AICPA members. Go to the AICPA Town Hall Series webpage for more information and to register.

To comment on this episode or to suggest an idea for another episode, contact Neil Amato, an FM magazine senior editor, at Neil.Amato@aicpa-cima.com.

Transcript:

Neil Amato: Welcome to the Journal of Accountancy podcast news update. I’m Neil Amato, a senior editor with the JofA, and this episode is going to be a quick look at the news accountants need to know.

We are in the last days of January at this recording. Tax season is about to get cranked up, more on that in a bit. We’ll also have a preview of the JofA’s February print issue.

First, however, the Paycheck Protection Program remains front and center. Eligible small businesses affected by the COVID-19 pandemic can apply for forgivable loans, but those organizations and their advisers have questions. Here to shed light about the latest on PPP is Kari Hipsak, a senior manager at the Association of International Certified Professional Accountants.

Kari, in a recent article in the JofA that includes your advice, with the headline “6 Tips for CPAs on the Newest Round of PPP Funding,” there was a theme early on: being aggressive, yet patient and vigilant. Tell me more about that.

Kari Hipsak: I would love to tell you about that, Neil. First of all, there are preparatory steps to take for the PPP. Borrowers and those who are representing borrowers can begin collecting the data and the documentation necessary for the program and ensure that they’re getting the correct information. Make sure that you read the revised applications and ensure that all of the necessary information is accumulated.

This is also important because of the second part of the theme you mentioned. The SBA has indicated there will be a more thorough review process upfront in an effort to protect the funds being used. They have a responsibility to ensure the funds are not being used inappropriately or going to ineligible entities. So, we ask that borrowers be patient with that process and the added burden that this additional process puts on all the systems involved. So, go ahead, be aggressive, get ready to apply, but also know that there have been changes.

Amato: For CPAs, what are the practical implications from the January 25 update from the U.S. Small Business Administration about processing of second-draw PPP loan applications?

Hipsak: This ties in perfectly with the “being patient” theme from the first question. As I mentioned, the steps that are being taken early on in the PPP application process as well as the implementation of other changes, now that the program is being re-funded, can cause a burden. The SBA is working to address the concerns of borrowers and lenders and of course the CPAs that are helping borrowers. We understand the anxiety and the stress that small businesses are under as the impact of this pandemic has been felt for almost a year. These concerns aren’t unheard by the SBA, and I think that’s the important piece that we need to remember, and of course we all look forward to seeing their responses in action.

Amato: What’s a thought or two you’d like to leave listeners with as they continue to navigate the PPP process?

Hipsak: First, I’d like to reiterate a message that we shared in the first round of PPP. If a business needs the funds, don’t overthink it. There is a requirement for those taking second-draw loans to demonstrate a 25% reduction in revenue. If this is met and there are financial concerns, please take the help that is being provided. The second piece that I would reiterate is be prepared. Make sure all the documentation that you need is collected, make sure all the necessary information is ready to go. As a reminder for second-draw PPP loans, the borrower will need their initial SBA loan number and the exact amount of the loan. It’s these small pieces of data that can be important to collect early on to help make the actual application process smoother. So, be prepared and take the funds if you need them.

Amato: That’s good advice. Kari, thank you.

Hipsak: Thanks, Neil. Always happy to join you.

Amato: Thank you, Kari. While plenty has been put on hold by the pandemic, career development has not. In the February print issue of the JofA, career development is the theme. Look for articles on handling tough interview questions, tips for building remote-work policies that last, and the cover story, career development in a virtual world, which takes a look at organizations’ efforts to grow the knowledge of a now decentralized workforce. Coming up next is a tax update.

I’m joined now by Alistair Nevius, the JofA’s editor-in-chief, tax. Alistair, income tax filing season is set to begin Feb. 12. That’s a slightly later start than usual. What should filers and practitioners know about that change?

Alistair Nevius: Well, that’s right, Neil. On Jan. 15, the IRS announced that tax season will start. That is, the IRS will start accepting and processing returns on Feb. 12. That’s about three weeks later than usual. The IRS said it needs more time to program and test it systems following tax law changes that were in the Consolidated Appropriations Act, 2021 (CAA), which was signed Dec. 27, and those changes included a second round of COVID-19 pandemic economic impact payments, so the stimulus checks that the IRS is sending out to people, and so to accommodate that, among other things, they needed to have more time to update their systems.

Amato: Regarding that law, are there other effects for this tax season?

Nevius: Well, the CAA as we’re calling it, the Consolidated Appropriations Act, did make many tax changes. Most of them don’t affect 2020 tax returns, but some do. One important area: The IRS has also said that refunds for taxpayers who claim the earned income credit or the additional child tax credit are going to be delayed because of that law.

The CAA said taxpayers could use 2019 income instead of 2020 to figure those credits, so that means the IRS will have to check not only the taxpayer’s 2020 tax return but also their 2019 tax return to confirm that they have figured those credits correctly. So that is adding time to the process.

Another thing that people should be aware of is that many states have followed suit and are also going to not start accepting returns until Feb. 12. I don’t have a full list, but several large states such as Pennsylvania and Illinois have announced that they are also going to have a Feb. 12 start date.

Amato: And the word that a lot of people still care about the most, that’s deadline. What about the April 15 deadline, is it still in place?

Nevius: The April 15 deadline is still in place. And so far, the IRS has made no announcement that they’re going to extend that date. This really leads to a second disrupted tax season in a row. As everybody knows, last season was affected by the pandemic. The April 15 tax filing and payment deadlines were pushed off to July 15. While that was a good thing in many ways because practitioners had been sent home, many people were not working in their offices, they couldn’t meet with clients, it gave them more time and it gave their clients more time to get their taxes done, it really led to a never-ending tax season. So far this year, the IRS is sticking with the April 15 date despite the later start. And really from what I’m hearing, practitioners are split about whether that’s a good thing or not.

On the one hand, a later start date can mean some work compression. It is true that tax software companies are accepting returns now and holding them until Feb. 12, and that should help mitigate work compression to some extent. But the Feb. 12 start date was widely publicized, it was in all the press, and so it’s quite likely that some taxpayers are going to hold off on getting their tax returns done until after Feb. 12, and that’s going to lead to more work during the Feb. 12 to April 15 time frame.

And so that work compression is always a problem for tax practitioners, and that’s going to just increase that. But on the other hand, as I said, many practitioners felt last tax season just never ended. Holding on to the April 15 date at least gives the tax season some finality. And it preserves that six-month gap before the October 15 extended due date, which was lost last year, and that added to practitioners’ workload. So, it’s a mixed bag, but it’s definitely a disrupted tax season this year.

Amato: Well, Alistair, thank you for being on and for providing us those updates.

Nevius: You’re very welcome.

Amato: And to the listeners, thank you for listening to the Journal of Accountancy podcast.