Many people didn't receive a stimulus check because of many possible reasons. One of the biggest reasons is having multi years of back tax returns not filed. Mike McVay is an expert working with the IRS to get your caught up and minimizing penalties and liabilities. He can work with you on taxes as far back as 10-years. Look at the services we offer in the image to the right. We offer these services at a reduced cost that will fit into your budget. Don't trust the big national firms, as they only care about volume and prices can fluctuate during the process.
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Trump’s executive order calls for a payroll tax deferral from Sept. 1 to Dec. 31, 2020. The order only addresses the 6.2 percent employee’s share of Social Security taxes but doesn’t apply to the 1.45 percent employee’s share of Medicare taxes, according to a briefing released Tuesday by Wolters Kluwer. The payroll tax deferral only applies to employees with bi-weekly pre-tax income of less than $4,000. The Treasury Department is expected to issue guidance on how the deferral will work and address a number of uncertainties.
McVay Business Services has payroll services for a fraction of the cost of other firms. Need Workers Comp? Not an issue with our services.
Mike McVay. Accountant 850-725-5696 * Mike@MikeMcVay.com
Bookkeeping and the CARES Act SBA EIDL Grant
First off, the CARES Act EIDL Grant is an emergency grant of up to $10,000, up to $1,000 per employee. Sole proprietors, for example, received $1,000.
Per the AIPB (American Institute of Professional Bookkeepers), “Proceeds can be used for such purposes as providing sick leave to employees unable to work due to the direct effect of COVID-19, maintaining payroll during business disruption or a substantial slow down, meeting increased costs of materials due to disruption of the supply chain, making rent or mortgage payments and repaying obligations that can’t be met due to revenue losses.”
EIDL Grant Notes
Is the SBA EIDL Grant Taxable Income?
There seems to be conflicting information on this. A recent article, titled“7 Questions About PPP and EIDL the SBA and Treasury Need to Answer ASAP” (bullet point #5) says “Yes” for regular pre-COVID-19 EIDL loans, but suggests there is ambiguity for the CARES Act SBA EIDL Grant.
That being said, most sources I have consulted indicate the CARES Act SBA EIDL Grants are tax-free money. That may change in the future, but this is my understanding as of today.
How to Book SBA EIDL Income
By now, many of our clients have received their SBA EIDL funds. Per the SBA website, while they are referring to it as a “loan,” the website clearly says, “This loan advance will not have to be repaid.” Since this is not a loan to be repaid, a liability account does not need to be created on the Chart of Accounts.
Instead, I recommend creating an “Other Income” account, which appears at the bottom of the P&L, not at the top. Suggested account name: SBA EIDL Grant-Not Taxable
One colleague even posited that since the EIDL is not a loan, and is not taxable, that it does not even need to appear on the P&L. It could instead be posted to the Balance Sheet as Owner’s or Shareholder Contribution. I am not in agreement with that approach, and instead recommend the P&L entry as noted above.
ConclusionThe above suggestions are for those who received just $10K from the SBA. However, many businesses did apply for, and receive, more. In those cases, a Long Term Liability account should be setup on the Chart of Accounts for the loan, and when the $10K portion is forgiven by the SBA, an adjusting entry can be made to move $10K from the loan liability account to Other Income.
Mike McVay is a degreed accountant with over 25+ years running and working with small businesses., a QuickBooks® Certified Pro Advisor, and a member of the Intuit elite network. His company, McVay Business Services in Pensacola, FL, specializes in remote bookkeeping services, QuickBooks clean-up and set-up, monthly and quarterly bookkeeping and individual, corporate and LLC income tax preparation. You can find his series of Blog posts here....
Mike McVay, Tax Accountant Blog
Certified QuickBooks ProAdvisor & Licensed Tax Accountant Pensacola, FL
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