✍️ Some of you may know that I’ve been writing this award-winning blog for 10 years now. Not monetized — just a labor of love that started out as a way to store articles for myself in an easy-to-search format. But during the pandemic its popularity exploded… not just for small business owners, but for the bookkeepers and accountants that keep them going. (If you didn’t already know my biggest passion is supporting small businesses & the communities that they help thrive and keep vital and colorful, then you must be new here.)
🔢 And I realized — when I help a small business, I help ONE of the key players in keeping local economies healthy. When I help a bookkeeper, I help a multiple of small business owners. When I help many bookkeepers… you can see where this is going…
🐣 Last year I decided that I wanted to focus my efforts on helping bookkeepers and tax pros learn to collaborate, and that the best way to start would be to offer a judgement-free space for bookkeepers to ask ANY QUESTIONS THEY WANT that for whatever reason they can’t ask their clients’ tax preparers (or, if in a firm, they don’t feel comfortable asking the tax department). And thus was born…
🏫 ASK A CPA! A member community designed to provide education, support, and resources for bookkeepers to better serve their clients — by preparing tax-ready books, improving relationships and building knowledge and systems that ultimately help small business owners and their communities.
❤️ We’re starting small, intentionally, and as such we’ll be capping our founding member group at only 50 people — there are only 9 spots left as of August 10th! Get in here and help us create the community you want to see in our industry. (Or feel free to just sign up for our updates if you want to have FOMO like all the time, that’s cool, too.)
Thanks yet again, and as always, to Lisa Simpson from the AICPA Town Hall for her regular updates on what’s going on with Employee Retention Credit processing at the IRS. I can trust this team to make sure I’m getting the latest information, free from rumors and gossip, and that I’m able to both quell my clients’ concerns and also manage their expectations.
I had just been hearing some rumblings in one of my professional associations — someone had said, “seems inevitable that anyone who filed an ERC claim after September 2023 will need to file a lawsuit to get the claim paid,” and went on to suggest that it would be a great opportunity for a law firm, and wanted to know if we had referrals in this space.
First off, it made me nervous — our remaining ERC claims, all for deserving small business and non-profit clients of a colleague, worked really hard to make sure we had what we needed to submit their claims by January 31st, 2024, since there was pending legislation that might retroactively end the program after that date. They all were informed that it might be a year or more before they received the money, given the IRS moratorium — but certainly none of us expected to line the pockets of an attorney in order to get the claims paid out. And in fact, the claims were mostly small enough that my guess is most lawyers wouldn’t bother with them.
Secondly… it made me suspicious. On what basis was this guy saying a lawsuit would be “inevitable”? I attend every single AICPA Town Hall and hadn’t heard anyone suggest this. And what a sad thing to suggest it would be a “great opportunity” for a law firm — to specialize in making money off those desperate to finally receive what they and their accountants had already worked so hard to obtain.
As usual, I decided to quell those fears until the next AICPA Town Hall, and I’m so glad I did, as Lisa Simpson made ERC the first topic in her Technical Update. She explained the recent IRS news release that likely triggered the unfounded rumblings I was hearing, as well as referenced a new Journal of Accountancy article that delved deeper.
My takeaway was that: while 10-20% of claims are clearly fraudulent, and the IRS is in the process of denying them; and another 60-70% show an unacceptable level of risk and will be examined carefully — there are also between 10% and 20% of the claims show a low risk. The IRS “will begin judiciously processing” more of these claims, and, according to the release, expects some of these payments to be made later this summer.
To me, that’s all good news. It means they’re working through the piles and expediting the ones that have straightforward claims where the businesses played by the rules, processing the oldest ones first. The rest will be examined more critically, or in the case of blatant fraud, flat-out denied.
The one disappointing piece of information is that no claims submitted during the moratorium will be processed at this time. But at least we know the backlog is being cleared to make way for them. Since the moratorium was put in place, the IRS has received over 17,000 claims per week.
I’ve let my clients know that they shouldn’t budget for these dollars for at least another year, but that there’s no reason to presume they won’t eventually receive the claims that are due to them.
And yet again I learned that if something sounds sensational and suspicious… it might not be grounded in evidence and analysis. Rely only on your trusted advisors for the education and resources that will help you guide your small business clients. (And then provide links to those resources to the sensationalists who spread misinformation.)
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
There were three SBA reporting dates: December 31, 2021; December 31, 2022; and a final report date of April 30, 2023 — which is fast approaching. The RRF eligible expense period, however, allows costs from the very beginning of the pandemic, February 15, 2020, clear through to March 11, 2023. The two year-end reporting dates were intended as just a progress report of what the recipients had spent so far in eligible costs.
The great news for most businesses was that if all the RRF funds were allocated to eligible costs before the first reporting date, no additional reporting was required. If not, then the business needed to come back the following year and report a second time. At this point, most restaurants have (hopefully) already submitted their final report.
However, for those who missed the first two reporting dates; or somehow didn’t expend all the funds before the end of 2022; or simply did not understand how to report properly; or didn’t realize what a wide date range of eligible expenses they could use… there is one shot left at a final report to the SBA, or they risk having to pay back the funds.
This blog post (with a 20-min video walking you through the process) is our suggestion of how to translate the info you already have in your bookkeeping software into a format that will easily conform to the Restaurant Revitalization Award Portal requirements.
Sample email from SBA regarding the initial RRF year-end reporting
Spoiler alert: the process takes more than 5 minutes. It can easily take an hour or more. The actual entering of data into the SBA RRF portal is the part that only takes 5 or so minutes.
Our recommendation is to download the free Restaurant Revitalization Fund Tracker from the American Institute of CPAs (AICPA) website (as with their PPP Forgiveness Calculator, you do have to register for an account, but there’s no charge). However, instead of entering each individual transaction on the form (as it’s designed for you to do), our suggested shortcut is to take the information you already have in your bookkeeping file and enter each category as one line — then subtract all the non-RRF grants and assistance received, so that you’re not double-dipping.
As mentioned earlier, the RRF period runs from February 15, 2020 — the very beginning of the pandemic — to March 11, 2023. So we suggest you run a Profit & Loss for your company for the period of February 15, 2020 all the way through March 11, 2023 (or February 28, 2023 if you’re doing this before March 2023 is reconciled), and use those numbers to report what has been spent so far. Then enter the non-RRF grant funds as negative numbers on the same Expense Tracker tab, so that they net against each other. The result will be the data you submit to the SBA at restaurants.sba.gov once you log in to your portal.
Step 1 – download the AICPA RRF Tracking Tool Step 2 – enter the name of your company in the Summary tab, cell A9 Step 3 – enter the RRF amount in the Expense Tracker tab, cell C6 Step 4 – run your Profit & Loss from 2/15/2020-2/28/2023 (or 3/11/23 if you’re doing this in April 2023) Step 5 – export to Excel and save to your RRF file folder Step 6 – on the Expense Tracker tab, enter summary amounts from the Profit & Loss for Payroll, Rent, Utilities, Food & Beverage, Maintenance, Supplies, Covered Supplier Costs, and Business Operations Expenses
Tip: skip Mortgage Payments, Debt Service, Outdoor Seating Construction, and Depreciation, or ask your accountant for help with these, as they are usually on the Balance Sheet or in the Non-Operating Expense section of the Profit & Loss, and are therefore harder to DIY.
Tip: Business Operations Expenses are all operating expenses that are not already accounted for in one of the other categories.
Step 7 – IMPORTANT: enter all the non-RRF grants and financial assistance as negative amounts on the Expense Tracker tab — this is to prevent any double-dipping Step 8 – go to restaurants.sba.gov and log in Step 9 – enter your name, address, EIN, phone, and email (if this information is not already there) Step 10 – enter the amounts from the Summary tab — Note: you cannot enter more than the total RRF grant, so you may need to reduce one or more of the categories so that you don’t exceed the total. Step 11 – if you have allocated all the RRF funds, certify as such — you will not be required to repeat this progress report next year; if you have not allocated all the RRF funds, you will be able to “Save” but not “Submit”.
You have until March 11, 2023 to allocate all the funds (aka spend them on eligible expenses), and until April 30, 2023 for final reporting. If it turns out you didn’t have enough eligible expenses from 2/15/20-3/11/23 using Profit & Loss Operating Expenses, then take some time to work with your accountant to determine if you have debt service, mortgage payments, capital expenses for outdoor seating, or depreciation that counts toward allowable costs.
In all cases: make sure to subtract all other grant income from expenses so you are not double-dipping!
23-minute video walking you through the whole process in Dec 2021
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
The change in law requires Payment Servicing Entities (PSEs) and Third-Party Settlement Organizations (TPSOs) such as PayPal, CashApp, Venmo, Etsy, Poshmark, and eBay to lower their reporting thresholds — from 200 transactions and $20,000 to anyone receiving $600 or more; a pretty massive net that would inadvertently ensnare plenty of folks who do not actually have taxable income, but who would be receiving a 1099-K under the new rules. As a result, many who sold personal items at a non-deductible loss might end up with unexpected tax filing requirements. The point of the changes was to catch the many “side hustles”, where folks are providing services or buying and reselling goods on online platforms, in cases where the taxpayer is either intentionally or unintentionally evading taxes on the unreported income.
Although the intention was made in good faith to close the tax gap and encourage under-reporters to comply with the law, the unintended consequences threatened to overburden already struggling IRS representatives, accountants and bookkeepers, and their small business clients.
Contrast a side gig where someone is buying items from thrift stores and reselling them on Etsy for a sizable profit — a taxable event — with someone who is cleaning out their childhood home and selling their family’s old clothing and housewares at a loss. Both would receive a 1099-K, but the second person isn’t running a business, and the loss isn’t deductible. However, if either of these folks doesn’t declare the income, they can expect an underreporting notice from the IRS. At the end of the day, the person selling old personal possessions would get a “pass” from the IRS, but not before having to deal with confusing and scary notices, resulting in required responses that won’t be reviewed for months, given the backlog of unprocessed snail mail that persists at the IRS.
You can imagine why so many of us were concerned about this imminent change — statements from the AICPA, NATP, National Taxpayers Union Foundation and other professional organizations made it clear that the burden on the beleaguered IRS and tax preparers was simply unreasonable, and the timeframe for implementation too short. Some issuers were going to be issuing exponentially more forms than previously and did not have the systems in place yet to manage the increase. Per the NATP, “the new rules create an undue burden on taxpayers and the IRS, which is still wading through a backlog of returns.”
To be clear: the delay in implementing these lower thresholds for receipt reporting on a 1099-K does not mean that income from providing services or buying and reselling goods is not taxable. It already was, it continues to be, and starting next year, it will be much harder for those trying to shirk their reporting responsibilities to do so.
For 2022, reporting in early 2023, the existing 1099-K reporting threshold of $20,000 in payments from over 200 transactions will remain in effect.
But the year’s delay gives taxpayers and their advisers more time to set up bookkeeping systems — especially for those who have not previously recognized that this type of income is in fact taxable — and allows the IRS some time to catch up on their backlog and come up with an approach for mitigating the countless numbers of folks who do not have reporting responsibilities but will likely get caught with an underreporting notice. Similarly, those taxpayers using Payment Servicing Entities like PayPal can use the extra time to get educated about what types of receipts are NOT taxable — gifts, for example, or resale of your own personal goods at a loss — and work with their PSE to make sure they’re processing these types of receipts in a way that is more likely to exempt them from receiving a 1099-K (hopefully PayPal, Venmo and the like will set up more clearly established instructions about “personal” vs “business” transactions).
I, for one, am glad for the opportunity to get back to spending my time working with clients on value-added activities, such as tax planning and managerial decision-making — rather than jumping through more compliance hoops — after a very long three years.
My colleagues at the National Society of Accountants for Cooperatives are offering a 75-minute webinar on Tuesday, August 23 to discuss the requirements and pitfalls in claiming Employee Retention Credits (ERC). The cost is free to members and $56 to non-members.
The ERC has been in the news quite a bit lately due to aggressive tactics by non-CPA firms claiming to be able to apply for these credits on behalf of business owners. (We’ll have an upcoming blog covering that topic.) However, the rules regarding whether or not a business qualifies are complex, and best performed by a knowledgeable professional.
During this webinar, the panelists will provide an overview of the Employee Retention Credit (ERC) and how to qualify for ERC including:
• Partial and full shutdowns as they apply to the ERC • What constitutes “gross receipts” • Safe Harbors • Rules for Large Employers • Unsettled matters and how the IRS is examining ERC claims
Participants are encouraged to submit questions in advance at info@nsacoop.org and during the session.
If you are an accountant or bookkeeper calculating these credits for your clients, or a business owner considering a DIY approach, please make sure you are thorough about obtaining education and resources before submitting anything to the IRS. You can expect their enforcement division to ramp up audits in the next few years.
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
We learned this week that the EIDL is permanently closing their Rapid Portal on May 16th. What does this mean for you?
If you haven’t already, download a copy of your EIDL loan agreement documents, and snap a screenshot of your loan number and save it to PDF for easy reference.
Your bookkeeper and accountant will thank you for this — and you’ll thank them for insisting you do it!
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
Last week, the Small Business Administration (SBA) made a welcome announcement for small business owners with Economic Injury Disaster Loans (EIDL) — for the third time in the past 12 months, they have announced that the deferral period for making payments on loan and interest has been extended.
As Journal of Accountancy points out, “the announcement Tuesday came exactly one year after the SBA had lengthened the deferral period from 12 months to either 18 months for loans made in 2021 or 24 months for loans made in 2020. In September, the SBA unveiled several major modifications to the program, including an extension of the deferral period for 2021 EIDL payments to 24 months as part of a series of major modifications designed to broaden the appeal of the program.”
One thing to keep in mind, however, is that borrowers taking advantage of this deferral will still be liable once their deferment period is up, to pay the principal plus interest on the whole period (including the extra deferred months). At around 3 percent, this is considered inexpensive compared to other loans, but it adds up.
We encourage borrowers to log into their SBA EIDL portal once-a-month to download the monthly EIDL statement and provide it to their bookkeeper or accountant to accrue the interest. Not only is this a good bookkeeping practice, but they may be surprised at the amount of interest that has accrued, which could change their approach toward either holding off or repaying it sooner. Unfortunately, if they don’t log into their SBA portal every 30 days, the password expires — so this is a way to avoid that issue and an added benefit of this approach.
Instructions for creating an account are here:
According to Inc. Magazine, “the announcement arrives just days after a group of 16 senators asked the SBA to extend the deferment period. In their letter, the senators emphasized the challenges that small businesses faced amid the surge of the Omicron variant, which included staffing crunches and drops in revenue. Those same challenges continue to linger for many businesses today.”
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
JOINT READINESS SUMMIT: This Friday, February 4 from 9:00AM to 4:00PM
Join the City of Chicago, Cook County, and State of Illinois leaders as well as other experts to learn about what it takes to be “ready” to apply for grants and contracts funded by American Rescue Plan Act (ARPA) and other economic recovery funding streams.
This event will take place via Zoom and will be simultaneously streamed on YouTube. Meeting information will be sent via email prior to the event. ASL interpretation and closed captioning will be provided.
Learn about the Chicago Recovery Plan — the City’s plan to amplify once-in-a-generation federal funding to create an equity-based investment strategy to catalyze a sustainable economic recovery from the COVID-19 pandemic. The funding under the Chicago Recovery Plan, which includes funding from the American Rescue Plan Act and over $600 million in local bond funds, is allocated alongside all other available resources in the City budget to maximize this opportunity over the next 3-5 year funding period. The initiatives and strategic priorities that make up the Chicago Recovery Plan were a result of several stages of community engagement and input during the 2022 budget development process. The list of current funding opportunities can be found here: Funding Opportunities (chicago.gov)
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
With one week left before year-end, it’s possible that you are among the folks who received an email (below) back in October but hasn’t yet reported to the SBA on the eligible expenses incurred so far. This blog post (with a 20-min video walking you through the whole process) is our suggestion of how to translate the info you already have in QuickBooks into a format that will easily conform to the Restaurant Revitalization Award Portal requirements.
Sample email from SBA regarding RRF year-end reporting.
Spoiler alert: the process takes more than 5 minutes. It can easily take an hour or more. The actual entering of data into the SBA RRF portal is the part that only takes 5 or so minutes.
Our recommendation is to download the free Restaurant Revitalization Fund Tracker from the American Institute of CPAs (AICPA) website (like their PPP Forgiveness Calculator, you do have to register for an account, but there’s no charge). However, instead of entering each individual transaction on the form (as it’s designed for you to do), our suggested shortcut is to take the information you already have in your QuickBooks file and enter each category as one line — then subtract all the non-RRF grants and assistance received, so that you’re not double-dipping.
The RRF period runs from February 15, 2020 — the very beginning of the pandemic — to March 11, 2023. The year-end reporting is just a progress report of what you’ve spent so far that is eligible for RRF program fund allocation. So we suggest you run a Profit & Loss for your company for the period of February 15, 2020 all the way through November 30, 2021 (or whatever your most recently reconciled month-end is), and use those numbers to report what has been spent so far. Then enter the non-RRF grant funds as negative numbers on the same Expense Tracker tab, so that they net against each other. The result will be the data you submit to the SBA at restaurants.sba.gov once you log in to your portal.
Step 1 – download the AICPA RRF Tracking Tool Step 2 – enter the name of your company in the Summary tab, cell A9 Step 3 – enter the RRF amount in the Expense Tracker tab, cell C6 Step 4 – run your Profit & Loss from 2/15/2020-11/20/2021 Step 5 – export to Excel and save to your RRF file folder Step 6 – on the Expense Tracker tab, enter summary amounts from the Profit & Loss for Payroll, Rent, Utilities, Food & Beverage, Maintenance, Supplies, Covered Supplier Costs, and Business Operations Expenses
Tip: for now, skip Mortgage Payments, Debt Service, Outdoor Seating Construction, and Depreciation, or ask your accountant for help with these, as they are usually on the Balance Sheet or in the Non-Operating Expense section of the Profit & Loss, and are therefore harder to DIY.
Tip: Business Operations Expenses are all operating expenses that are not already accounted for in one of the other categories.
Step 7 – IMPORTANT: enter all the non-RRF grants and financial assistance as negative amounts on the Expense Tracker tab — this is to prevent any double-dipping Step 8 – go to restaurants.sba.gov and log in Step 9 – enter your name, address, EIN, phone, and email (if this information is not already there) Step 10 – enter the amounts from the Summary tab — Note: you cannot enter more than the total RRF grant, so you may need to reduce one or more of the categories so that you don’t exceed the total. Step 11 – if you have allocated all the RRF funds, certify as such — you will not be required to repeat this progress report next year; if you have not allocated all the RRF funds, you will be able to “Save” but not “Submit”.
If you have not allocated all the funds yet, then follow this same process next year by December 31, 2022 — you can run the Profit & Loss from 12/1/2021-11/30/2022 at that point and follow the same approach. Most folks will have sufficient eligible expenses from 2/15/2020-11/30/2021 to “use up” the whole RRF grant, but after subtracting other grant income from expenses, may find that they still have a balance left over that they can allocate costs to when reporting at the end of 2022.
You have until March 11, 2023 to allocate all the funds (aka spend them on operating expenses, and until April 30, 2023 for final reporting. If it turns out you didn’t have enough eligible expenses from 2/15/20-11/30/21 using Profit & Loss Operating Expenses, then take some time to work with your accountant to determine if you have debt service, mortgage payments, capital expenses for outdoor seating, or depreciation that counts. You can report these in next year’s RRF Program Post-Award Report, along with next year’s Profit & Loss Operating Expenses. In all cases: make sure to subtract all other grant income from expenses so you are not double-dipping!
23-minute video walking you through the whole process — Merry Christmas!
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
My excellent colleagues over at Wegner CPAs are providing yet another free webinar on the remaining Covid-19 relief programs for small business owners.
Do you still have questions about the COVID relief programs? Join us for an overview of what’s available and learn about any updates to the:
Kate Serpe, CPA, Senior Manager, joined Wegner CPAs as an intern in 2010 and was hired full-time as part of the Accounting Solutions Group in 2011. Kate has experience providing controllership and CFO services to cooperatives and not for profit organizations and specializes in board presentations and assisting clients with strategic planning.
Dan Bergs, CPA, Senior Manager, joined Wegner CPAs as an intern in 2008 and started full-time after graduation in 2010. He specializes in working individual and business clients providing them with a variety of tax and accounting services.
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
