Greetings to all in our first post-election publication……well, kind of post-election anyway, right? Today’s topics include a high-level look at a potential Biden tax plan as well as the recently issued PPP loan questionnaires and an upcoming tax filing reminder.
Biden Tax Plan
In the wake of last week’s Presidential election, many Americans are wondering how the Biden tax plan might impact them. The President-elect has not been shy about raising taxes on individuals earning more than $400,000, which has many taxpayers nervous. First and foremost, let’s be clear, the President can not implement tax law with an executive order. Tax legislation must be passed by both the House and Senate, and the Senate may still end up with Republicans in the majority. This would make it very difficult and in fact unlikely for any tax legislation to pass. That being said, below are some bullet points on what the tax plan might include.
- The top income tax rate would increase from 37% to 39.6%
- The top rate for capital gains and qualified dividends would increase from 20% to 39.6%
- Social Security payroll taxes of 6.2% would apply to wages in excess of $400,000.
- The Qualified Business Income Deduction would be phased out for taxpayers with taxable income in excess of $400,000.
- Itemized deductions will be phased out similar to pre-2018 tax law
- The corporate tax rate would increase from 21% to 28%
- The estate tax rate would increase from 40% to 45% and the exemption amount would drop from $11.58 million to $3.5 million
- Child Tax Credit would increase from $2,000 to $3,600 and be fully refundable
- Child and Dependent Care Credit would increase from $3,000 to $8,000 ($16,000 per family) and be 50% refundable
- New $5,000 credit for caregivers of the elderly
- First time homebuyer credit of up to $15,000
This is certainly not an all-inclusive list, but more of a glimpse of what the President-elect has proposed. As we mention above, any tax legislation would have to make it through both the House and Senate, so the end product could look much different. Of course, if Republicans maintain the majority in the Senate, any tax law changes at all would seem unlikely.
The Small Business Administration (SBA) recently announced that two new questionnaires have been created for PPP borrowers with loans of $2 million or more. One questionnaire is for For-Profit borrowers (Form 3509 click here ) and the other is for Non-Profit Borrowers (Form 3510 click here ). These forms address the business activity and liquidity of the borrowers. It is anticipated that they would be filled out in addition to the loan forgiveness applications and be due to the lender within 10 days of receipt by the borrower. This is consistent with previous guidance from the SBA that it would be reviewing loans of $2 million or more to ensure that there was a need. The forms are nine pages long and include 21 questions. Guidance at this point is somewhat limited, but the SBA is expected to release more information in the upcoming weeks.
Due Date Reminder
Federal Form 990 – As mentioned in our previous publication, don’t forget that the extended due date for the Federal Form 990 for 2019 calendar year-end is Monday, November 16th!
Your Bertz, Hess & Co. tax and business advisor will be happy to discuss any of these topics with you.