COVID-19 Relief: Loan Payments and Grants Update

Date July 19, 2022
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Borrowers of COVID-19 relief loans and recipients of COVID-19 relief grants should be aware of the following information:

Economic Injury Disaster Loan

The COVID-19 Economic Injury Disaster Loan, or EIDL, is a loan program introduced in March 2020 that provided eligible small businesses with funding to support their working capital needs during the pandemic. The EIDL has a 30-year maturity, and the loan must be repaid.

To further support working capital concerns, principal and interest payments for EIDLs were deferred up to thirty months from the date of the note, although interest accrued during the deferral period.

For some borrowers, the deferral period is coming to an end meaning that loan payments are due soon. Borrowers who are unsure when to pay can obtain their account balances, interest amounts, and payment due dates by visiting the SBA Capital Access Financial System (CAFS) here. Borrowers with no CAFS account can refer to instructions to create an account at CAFS_Borrower.pdf (sba.gov). Nonprofit borrowers are encouraged to call their loan’s Servicing Center to access their CAFS account.

Borrowers can make loan payments via the following methods:

  • Submit payment using https://www.Pay.gov, as an SBA Form 1201 Borrower Payment using a bank account (ACH), PayPal account, or debit card. This is the preferred payment method.
  • Submit payment via your personal banking account by adding the US Small Business Association as a payee. Make sure to enter your 10-digit loan number (NOT application number) as the account number. The following information can be used if needed:
    • Address: P.O. Box 3918, Portland, OR 97208-3918
    • Telephone Number: Use the number on the front of your statement.
  • Mail your payment to the U.S. Small Business Administration, P.O. Box 3918, Portland, OR 97208-3918. Include your 10-digit loan number (NOT application number) on the memo field of your check or money order. Make sure to include your business’s name, the borrower’s name, the borrower’s address, account number, tax ID/EIN or social security number, and 10-digit SBA loan number with your check.

Pursuant to program guidelines, SBA has filed liens against business assets for all loans greater than $25,000. Businesses with outstanding loans who want to sell assets, including equipment, must contact the SBA to release the lien. Borrowers may need to provide additional payments to SBA to reduce the loan balance for the lien to be released. Borrowers are encouraged to contact the SBA as far in advance as possible of any potential sale, by contacting their local SBA servicing center.

Paycheck Protection Program

Borrowers with a Paycheck Protection Program (PPP) loan authorized in 2021 through the Consolidated Appropriations Act or Paycheck Protection Program Extension Act who have not applied for loan forgiveness should consider doing so. Borrowers have ten months from the end of their twenty-four week Covered Period to submit their loan forgiveness application to their lender. If forgiveness applications are not submitted, borrowers will be required to make principal and interest payments on their PPP loan.

Borrowers with loans of $150,000 or less may also use the SBA PPP Direct Forgiveness Portal if their bank has opted into its use. The portal can be accessed at https://directforgiveness.sba.gov/requests/borrower/login/?next=/. For questions on whether to use this portal or how to access the lenders’ forgiveness portal, borrowers should contact their PPP lender.

Grant Programs

Some grant programs, including the Shuttered Venue Operators Grant (SVOG), Coronavirus Economic Relief for Transportation Services (DOT), or Restaurant Revitalization Fund (RRF) have certain requirements, including reporting obligations that the recipient must complete. All grant recipients should review their grants’ program guidelines carefully and ensure they complete any obligations timely. Failure to meet requirements may result in the issuing organization revoking grant funds.

For questions regarding your COVID-19 relief, please contact your HBK Advisor.

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Homeward Bound: Can You Claim the Home Office Deduction in 2020?

Date February 8, 2021
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The COVID pandemic forced many of us home for at least part of the year, resulting in our homes functioning as schools, day care facilities, and, yes, offices. With this shift – whether it is temporary or it will become the new norm – you may be wondering if you are entitled to a nice tax break in the form of the Home Office Deduction. If you are an employee, the short answer is No. The Tax Cuts and Jobs Act (TCJA) of 2017 suspended the Home Office Deduction for employees for tax years 2018 through 2025. Therefore, the remainder of this article will focus on self-employed individuals.

In general, expenses associated with a “dwelling unit” used by a taxpayer as a residence are disallowed unless a specific exception applies. As one exception to the general rule, a taxpayer is permitted to deduct expenses for the business use of a home. Now, you may be wondering if “working from home” is akin to “business use of a home.” The answer – maybe.

If you are self-employed, we need to look at the specific requirements in the Code to determine whether you qualify for the deduction. Expenses may be deductible if the home is used regularly and exclusively (1) as the principal place of business, (2) as a place for meeting or dealing with patients, clients, or customers for business purposes, or (3) in connection with a business if the office is a separate structure that is not attached to the home. These three rules require regular and exclusive use for the space to qualify as a “home office,” so some definitions are in order.

Regular Use

To qualify as regular use, the specific area must be used for business purposes on a regular basis (I know – thank you Captain Obvious). The proposed regulations are not very helpful with this determination – they provide that whether the taxpayer’s use is “regular” depends on “all the facts and circumstances.” If we look to case law, regular use is probably achieved with frequent and repetitive use, and occasional or incidental business use likely does not meet the standard.

Exclusive Use

To qualify as exclusive use, a specific area in your home must be used only for your business. It does not qualify if used for both personal and business purposes. The area does not need to be a specific room (i.e., marked off by a permanent partition); it can be a specifically identifiable space within a room (e.g., a desk in the corner of a room).

Principal Place of Business

Okay, so your use is regular and exclusive, but is your home office the “principal place of business?” If you have no other business location, the answer is easy, but what if you have multiple business locations (i.e., you have a separate office and you work out of your home)? Under the rules, two alternative standards are available to determine which location is the principal place of business.

First, if the home office is used regularly and exclusively for administrative or management activities, and there is no other location where such activities are conducted, it qualifies as the principal place of business. The Service has identified the following as examples of administrative or management activities: billing customers, clients, or patients; keeping books and records; ordering supplies; setting up appointments; and forwarding orders or writing reports. This is huge – even if you have a business location outside the home, you may qualify for the Home Office Deduction if the business is managed from the home.

Alternatively, the principal place of business determination may be made based on the relative importance of the activities performed at each location and the time spent at each location. In evaluating the relative importance of the activities performed, the location at which services are rendered or goods are delivered is a principal consideration. If comparing the activities performed at each location does not yield a definitive conclusion, the time spent at each location may be used. In 2020, the relative importance of activities performed and time spent at home may have drastically increased, thus making your home the principal place of business this year when it may have not been in the past.

Place for Meeting or Dealing with Patients, Clients, or Customers

If your home office does not qualify as the principal place of business, you may still be able to claim the Home Office Deduction under the “meeting or dealing” exception. Again, the business use of your home office must be regular and exclusive, and if your meetings or dealings with patients, clients, or customers in your home office are more than occasional and are substantial and integral to the conduct of your business, you may qualify for the Home Office Deduction. Importantly, this exception only applies if your patients, clients, and customers physically visit your home – phone calls and video conferences do not qualify.

Separate Structure Not Attached to Dwelling Unit

If all else fails, you may still be able to claim the Home Office Deduction if the office is a separate structure from, and not attached to, your home and you use it regularly and exclusively for business purposes. Examples include a free-standing studio, garage, or barn.

Limitations and Eligible Expenses

If, based on the rules articulated above, you have a qualifying home office, you may be able to deduct expenses for the business use of your home, subject to certain limitations (there are ALWAYS limitations). The Home Office Deduction is subject to a gross income limitation, meaning that the deductions for the home expenses cannot be used to create a net loss for the business activity. There are two methods available to calculate the Home Office Deduction – the Regular Method and the Simplified Option. The Simplified Option involves simply multiplying the allowable square footage of the home office (up to a maximum of 300 square feet) by a prescribed rate ($5.00) to determine the deduction (capped at $1,500). Under the Regular Method, actual expenses must be allocated between the personal use portion of the home and the business use portion of the home. Common methods of allocation include square footage or number of rooms. Allocable expenses include real estate taxes, home mortgage interest, depreciation, insurance, utilities, repairs, and rent paid in the case that you do not own the home.

Conclusion

Due to the COVID pandemic, we are using our homes for business purposes more than ever before. If you think you may now qualify for the Home Office Deduction, or have questions regarding your personal tax situation, please contact your HBK representative or a member of our Tax Advisory Group to discuss further.

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HBK CPAs COVID-19 Preparedness Update

Date March 18, 2020
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Dear Clients and Friends, First, I want to express our sincerest hope that you and your family are well and taking measures to ensure your ongoing health and safety. Your well-being and that of our team members are always our primary concern. I want to assure you that through the COVID-19 situation we will remain active and attentive to your financial needs. We are mindful that there are tax deadlines to address, financial reporting concerns to resolve, and we certainly are monitoring the financial markets. All these services require the close personal and uninterrupted attention of our Wealth Advisors. In our offices or working remotely, we will remain fully engaged on your behalf. We have taken measures to ensure our communications with you remain open, active, expedient and efficient. The are many measures we are taking to protect your interests, our people and our firm in these challenging times. These are designed to ensure our service remains uninterrupted and people remain healthy. Here’s just a sampling of what we’re doing: Our offices: Currently, our offices remain open. However, it may be in reduced numbers as many of our team members are working remotely from home. If it becomes necessary to close our offices, we will inform you of that decision. Even if offices close, the lines of communication will remain open. Communication: We have taken steps to ensure ongoing, efficient communications, both with you and within our firm. You will be able to reach us and communicate with us as you normally do. Your calls will be answered and returned. Meetings and travel: We have postponed all non-essential travel, including travel between our offices. We are canceling unnecessary meetings and gatherings and using alternative means of communication to conduct meetings that are deemed critical. For example, our videoconferencing capabilities ensure easy and firm-wide access to virtual meetings and communications. Staying healthy: We have stressed the importance of following the protocols recommended by the Center for Disease Control, including frequent washing of hands, covering sneezes and coughs and avoiding large gatherings of people. These are unprecedented times. We will continue to monitor and adjust these measures as necessary to remain prudent and responsible. If you have any concerns or questions, please call us. We remain dedicated to providing you the best service possible. As always, we are here to help. We have endured difficult times before, and we will come through this together. From our team to each of you, be well, be safe and we appreciate the opportunity to serve. Sincerely, Christopher Allegretti Managing Partner and CEO
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