Simplified Small Business Accounting Regulations Proposed
The IRS has released proposed regulations to adopt the simplified tax accounting rules for small businesses under the Tax Cuts and Jobs Act (TCJA). For tax years beginning in 2019 and 2020, these simplified tax accounting rules apply to taxpayers having average annual gross receipts of $26 million or less (known as the gross receipts test), and exempted these taxpayers from the uniform capitalization rules. Accounting and inventory methods are addressed, as well as long-term construction contracts. Taxpayers classified as tax shelters may not use the simplified rules.
Rehabilitation Credit Deadlines Extended
Additional pandemic relief has been provided by the IRS for rehabilitation credits. These are projects that satisfy the “substantial rehabilitation test” within a 24- or 60-month period. Any qualified project whose deadline was on or after April 1, 2020 but before March 31, 2021, now has until March 31, 2021 to satisfy the test. Projects usually have to claim the credit over five years, but under a transition rule, some projects may be able to claim the credit in a single year.
Guidance For Business Interest Expense Deduction Limitation
The IRS has issued final regulations regarding TCJA provisions that limit the deduction for business interest expense, including the changes made by basic statutory amendments to the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). In addition to these final regulations, proposed regulations have been issued for other situations not addressed, including more complex issues related to CARES Act amendments. Written and electronic comments in response to the proposed regulations are encouraged.
Retirement Account Rules Loosened
The IRS reminds taxpayers that CARES Act provisions allow for easier access to retirement funds, for those who qualify. Early distribution of some retirement funds may be made without the usual penalties. Those eligible for coronavirus-related relief may be able to withdraw up to $100,000 before December 31, 2020, from IRAs, 401(k) plans, 403(b) plans, profit-sharing plans and others. Relief includes delayed loan repayments, an increase in loan limits, a waiver of the 10% tax on early distributions, and more.