Wolters Kluwer Tax & Accounting deals with various new tax issues for companies
July 29, 2021 – (BUSINESS WIRE) – Wolters Kluwer Tax & Accounting (AEX: WKL):
What: Companies have faced many tax challenges over the past year. Efforts to help businesses cope with the effects of the COVID-19 pandemic resulted in the Paycheck Protection Program (PPP) loans, which created some confusion as to whether the expenses associated with PPP loans made are tax deductible. Companies have been offered several tax breaks related to Social Security and Medicare taxes to help employers retain workers during the pandemic. However, these tax breaks came in a variety of forms, which changed with each new tax law and were hampered by the backlog of the Internal Revenue Service (IRS) in processing declarations and issuing guidance. Corporations have also continued to grapple with delayed guidance from the tax rules of the Tax Cuts and Jobs Act and are now faced with the possible repeal or revision of many of these business rules as part of the current government’s tax proposals.
Why: Companies and their tax advisors were challenged to keep up with the changes of the past few years. By 2022, companies could experience even more significant legal and regulatory changes that could pose new challenges for the foreseeable future.
Income tax. The Tax Cuts and Jobs Act brought lower corporate tax rates, a new pass-through allowance for businesses, the abolition of the alternative minimum tax for businesses and the immediate posting of short-lived capital assets. However, the law also restricted corporate interest deduction and the elimination of net operating loss carryforward, both of which were changed in the subsequent COVID-19 legislation. The current government is proposing changes to many of these provisions
PPP spending. PPP made significant forgivable loans to companies, and the resulting IRS policy specified the ability to deduct expenses related to those waived loans
Income tax. The response to COVID-19 has resulted in paid sick leave and family vacation credits, an employee loyalty credit, and a deferral of the employee’s share of income tax. These provisions reduced payroll tax obligations, but also led to administrative burdens and compliance problems with extensions and changing requirements
Health insurance. The reimbursement of COBRA rewards to employers paid for former employees also counts toward Medicare taxes, and the requirements for flexible spending accounts for health and care have changed
Financing of old-age provision. In response to COVID-19, legislation relaxed some of the funding and testing requirements for retirement plans at one and multiple employers
State taxes. States introduced and enforced new economic cohesion laws in response to the United States Supreme Court (SCOTUS) decision in Wayfair; Some states have started enacting regulations governing the taxation of digital assets. The states are also adopting an IRS sanctioned workaround of the federal limit on the deduction of state taxes through the use of pass-through units
Regularly expiring tax regulations. Some of the tax provisions that regularly expire, such as the deduction for energy-efficient commercial buildings and the track maintenance loan, have been finalized. While others were extended to 2025, many related to specific industries or energy were only extended to 2021
International taxation. The guidance on most of the international tax regulations of the Tax Cuts and Jobs Act has been finalized. However, the current government is proposing significant changes to these regulations while working with the Organization for Economic Co-operation and Development on a global approach to the allocation of corporate income and minimum corporate taxes
Court decisions. Recent decisions by SCOTUS addressed issues such as maintaining the Affordable Care Act, prior to enforcement of IRS reporting requirements backed by a tax penalty, and state taxation of teleworkers
Business lunch. While the Tax Cuts and Jobs Act ended business entertainment deduction, 100 percent business lunch deduction was reintroduced for 2021 and 2022 when the food and drink is provided by a restaurant
Who: Tax expert Mark Luscombe, JD, LL.M, CPA, Principal Federal Tax Analyst at Wolters Kluwer Tax & Accounting, can help discuss current and planned changes in corporate tax issues.
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PLEASE NOTE: The content of this article is designed to provide accurate and authoritative information relating to the topic being discussed. The information is provided with the reservation that Wolters Kluwer Tax & Accounting does not provide any legal, accounting or other professional services.
Contact: To arrange an interview with Mark Luscombe or other federal and state tax experts from Wolters Kluwer Tax & Accounting on this or other tax-related topics, please contact Bart Lipinski.
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