IR-2020-279,
​December 22, 2020

WASHINGTON — The Internal Revenue Service today issued the 2021 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.
Beginning on January 1, 2021, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
​

• 56 cents per mile driven for business use, down 1.5 cents from the rate for 2020,
• 16 cents per mile driven for medical, or moving purposes for qualified active duty members of the Armed Forces, down 1 cent from the rate for 2020, and
• 14 cents per mile driven in service of charitable organizations, the rate is set by statute and remains unchanged from 2020.

The standard mileage rate for business use is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.
It is important to note that under the Tax Cuts and Jobs Act, taxpayers cannot claim a miscellaneous itemized deduction for unreimbursed employee travel expenses. Taxpayers also cannot claim a deduction for moving expenses, unless they are members of the Armed Forces on active duty moving under orders to a permanent change of station. For more details see Moving Expenses for Members of the Armed Forces.
Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

Taxpayers can use the standard mileage rate but must opt to use it in the first year the car is available for business use. Then, in later years, they can choose either the standard mileage rate or actual expenses. Leased vehicles must use the standard mileage rate method for the entire lease period (including renewals) if the standard mileage rate is chosen.

https://ramlcpa.link/3d56d | ​Journal of Accountancy

While not law just yet, it is expected to be signed by the president as soon as today.

While we know many key details, there are some key details we don't know, especially regarding the PPP Loan Program. The most pressing in my mind are bank participation and when applications will be accepted as some time will be needed to restart the program.
 
Additional details will be forthcoming and the below summary will probably be updated over the coming days for additional details and clarifications.

Below, I summarize the key provisions in the bill:​

 $325 billion in aid for small businesses struggling after nine months of pandemic-induced economic hardships.  
    Allocations           

• $284 billion to the U.S. Small Business Association (SBA) for first and second PPP forgivable small business loans and 
• $20 billion to provide Economic Injury Disaster Loan (EIDL) Grants to businesses in low-income communities. 
• $15 billion in dedicated funding  for shuttered live venues, independent movie theaters, and cultural institutions 
• $12 billion will be set aside to help business in low-income and minority communities.   

$120 billion to provide workers receiving unemployment benefits a       

• $300 per week supplement from Dec. 26 until March 14, 2021.       
• This bill also extends the Pandemic Unemployment Assistance (PUA) program, with expanded coverage to the self-employed, gig workers, and others in nontraditional employment, and the Pandemic Emergency  Unemployment Compensation (PEUC) program, which provides additional weeks of federally funded unemployment benefits to individuals who exhaust their regular state benefits. 

Other Provisions           
               
 $25 billion in emergency rental aid and an extension of the national eviction moratorium through Jan. 31, 2021.  
               
 $45 billion in transportation funding, including          

• $16 billion for airlines,          
• $14 billion for transit systems,          
• $10 billion for state highways,         
• $2 billion each for airports and intercity buses, and        
• $1 billion for Amtrak.          

               
$82 billion in funding for colleges and schools, including support for HVAC repair and replacement to mitigate virus transmission, and  
  
$10 billion in child care assistance.          
                           
$22 billion for health-related expenses incurred by state, local, Tribal, and territorial governments.   
               
$13 billion for emergency food assistance, including a 15% increase for six months in Supplemental Nutrition Assistance Program benefits. 
  
$7 billion for broadband expansion.          
               
  The bill also extends the           

• Employee retention tax credit and several expiring tax provisions

​
​   and temporarily allows a             

PPP Round one (1) recipients (PPP1) may apply for another loan of up to $2 million, provided they:             

•  Have 300 or fewer employees.         
•  Have used or will use the full amount of their first PPP loan.       
•  Can show a 25% gross revenue decline in any 2020 quarter compared with the same quarter in 2019.
•      

First-time PPP borrowers will also permitted from the following groups:      

• Businesses with 500 or fewer employees that are eligible for other SBA 7(a) loans.    
• Sole proprietors, independent contractors, and eligible self-employed individuals.    
• Not-for-profits, including churches.         
• Accommodation and food services operations (those with North American Industry Classification System (NAICS) codes starting with 72) with fewer than 300 employees per physical location.  

PPP loan terms           
               
As with PPP Round 1 (PPP1), the costs eligible for loan forgiveness in PPP Round 2 (PPP2) include payroll, rent, covered mortgage interest, and utilities. 
 
PPP2 also makes (adds) the following potentially forgivable:       

• Covered worker protection and facility modification expenditures, including personal protective equipment, to comply with COVID-19 federal health and safety guidelines.  
• Expenditures to suppliers that are essential at the time of purchase to the recipient’s current operations.  
• Covered operating costs such as software and cloud computing services and accounting needs.   

               
To be eligible for full loan forgiveness, PPP borrowers will have to spend no less than 60% of the funds on payroll over a covered period of either eight (8) or twenty-four (24) weeks — the same parameters PPP1 had when it stopped accepting applications in August.
       
PPP borrowers may receive a loan amount of up to 2.5 times their average monthly payroll costs in the year prior to the loan or the calendar year, the same as with PPP1, but the maximum loan amount has been cut from $10 million in the first round to the previously mentioned $2 million maximum. PPP borrowers with NAICS codes starting with 72 (hotels and restaurants) can get up to 3.5 times their average monthly payroll costs, again subject to a $2 million maximum.
 
​
Simplified application and other terms of note              
               
 The new COVID-19 relief bill also:          

• Creates a simplified forgiveness application process for loans of $150,000 or less. Specifically, a borrower shall receive forgiveness if a borrower signs and submits to the lender a certification that is not more than one page in length, includes a description of the number of employees the borrower was able to retain because of the loan, the estimated total amount of the loan spent on payroll costs, and the total loan amount. The SBA must create the simplified application form within 24 days of the bill’s enactment and may not require additional materials unless necessary to substantiate revenue loss requirements or satisfy relevant statutory or regulatory requirements. Borrowers are required to retain relevant records related to employment for four years and other records for three years, as the SBA may review and audit these loans to check for fraud. 

• Repeals the requirement that PPP borrowers deduct the amount of any EIDL advance from their PPP forgiveness amount. 
• Includes set-asides to support first-time and second-time PPP borrowers with 10 or fewer employees, first-time PPP borrowers that have recently been made eligible, and for loans made by community lenders. 

The bill also specifies that business expenses paid with forgiven PPP loans are tax-deductible. This supersedes IRS guidance that such expenses could not be deducted and brings the policy in line with what the AICPA and hundreds of other business associations have argued was Congress’s intent when it created the original PPP as part of the $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act, P.L. 116-136 (see the Dec. 3 letter from the AICPA and state societies to congressional leaders). 
               
The COVID-19 relief bill clarifies that “no deduction shall be denied, no tax attribute shall be reduced, and no basis e shall be denied, by reason of the exclusion from gross income provided” by Section 1106 of the CARES Act (which has been redesignated as Section 7A of the Small Business Act). This provision applies to loans under both the original PPP and subsequent PPP loans.

It's important to note that Governor Hogan signed an executive order (copy below, FAQs) that excludes 2020 employer data from the formula used to determine the 2021 unemployment rate. If the Governor had not done this, all employers would have had an even higher tax rate for 2021.

​While obviously not good news, at first glace it might not sound all that punitive at first glance. However, imagine you have 50 employees, all of which require an unemployment contribution. That comes out to an extra $8,075 that employers will have to pay in for 2021. In higher turnover businesses such as retail and hospitality, it's very possible to have on average 10 to 15 employees per year, but because of attrition this equals 50 or more total employees per year, all of which require their own unemployment contribution.

While unemployment rates will reduce over time as we saw a similar situation occur during and after the financial crisis (great recession). Unfortunately, in the short term, this is one more hit businesses are going to have to contend with.

It's a fallacy to think that you achieve absolute security and complete peace of mind, especially with your finances. You can prepare and save huge sums of money only to find out it was enough to cover situation X, but situation Y, the one you hadn't considered, not even close. If the pandemic taught us anything, it's that no industry, business, or our economy is immune from significant disruption given the right circumstances. 

That said, there are steps we can take to better address the inherent risk we face in and our lives and especially with our finances,  The below list comes from an article by Michael Kay and while I've used these points when providing professional advice, the way they're stated here is unlike how they're normally presented by an accountant or financial planner. I especially appreciate items #2, #4.and #6 as they don't require a degree in accounting or finance to see their importance.