Encore Partners
  • About Us
    • Who We Are
    • Client Testimonials
    • Careers
  • Services
  • Insight
  • Contact
  • Client Portal
  • Client Payments
  • Suralink
  • Menu Menu
Favorable PPP loan changes and doubled business meal deductions

Favorable PPP loan changes and doubled business meal deductions

January 6, 2021/in News, Tax Tips - Business/by Betty Kim

The COVID-19 relief bill, signed into law on December 27, 2020, provides a further response from the federal government to the pandemic. It also contains numerous tax breaks for businesses. Here are some highlights of the Consolidated Appropriations Act of 2021 (CAA), which also includes other laws within it.

PPP loans

The new law authorizes more money towards the Paycheck Protection Program (PPP) and extends it to March 31, 2021. There are a couple of tax implications for employers that received PPP loans:

  1. Clarifications of tax consequences of PPP loan forgiveness. The law clarifies that the non-taxable treatment of PPP loan forgiveness that was provided by the 2020 CARES Act also applies to certain other forgiven obligations. Also, the law makes clear that taxpayers, whose PPP loans or other obligations are forgiven, are allowed deductions for otherwise deductible expenses paid with the proceeds. In addition, the tax basis and other attributes of the borrower’s assets won’t be reduced as a result of the forgiveness.
  2. Waiver of information reporting for PPP loan forgiveness. Under the CAA, the IRS is allowed to waive information reporting requirements for any amount excluded from income under the exclusion-from-income rule for forgiveness of PPP loans or other specified obligations. (The IRS had already waived information returns and payee statements for loans that were guaranteed by the Small Business Administration).

Business meal deduction increased 

The new law includes a provision that removes the 50% limit on deducting business meals provided by restaurants and makes those meals fully deductible.

As background, ordinary and necessary food and beverage expenses that are incurred while operating your business are generally deductible. However, for 2020 and earlier years, the deduction is limited to 50% of the allowable expenses.

The new legislation adds an exception to the 50% limit for expenses of food or beverages provided by a restaurant. This rule applies to expenses paid or incurred in calendar years 2021 and 2022.

The use of the word “by” (rather than “in”) a restaurant clarifies that the new tax break isn’t limited to meals eaten on a restaurant’s premises. Takeout and delivery meals from a restaurant are also 100% deductible.

Note: Other than lifting the 50% limit for restaurant meals, the legislation doesn’t change the rules for business meal deductions. All the other existing requirements continue to apply when you dine with current or prospective customers, clients, suppliers, employees, partners and professional advisors with whom you deal with (or could engage with) in your business.

Therefore, to be deductible:

  • The food and beverages can’t be lavish or extravagant under the circumstances, and
  • You or one of your employees must be present when the food or beverages are served.

If food or beverages are provided at an entertainment activity (such as a sporting event or theater performance), either they must be purchased separately from the entertainment or their cost must be stated on a separate bill, invoice or receipt. This is required because the entertainment, unlike the food and beverages, is nondeductible.

Much more

These are just a couple of the provisions in the new law that are favorable to businesses. The CAA also provides extensions and modifications to earlier payroll tax relief, allows changes to employee benefit plans, includes disaster relief and much more. Contact us if you have questions about your situation.

Tags: Business, culture
Share this entry
  • Share on Facebook
  • Share on Twitter
  • Share on LinkedIn
  • Share on Telegram
  • Share by Mail
https://encorepartnersllp.com/wp-content/uploads/2021/02/PPP.png 292 560 Betty Kim https://encorepartnersllp.com/wp-content/uploads/2021/02/Logo_hex2-1030x266.png Betty Kim2021-01-06 11:35:002021-03-08 15:15:31Favorable PPP loan changes and doubled business meal deductions
You might also like
Encore Partners Tax Calculator Can’t pay your income taxes on time?
Encore Team Collage Encore’s Business Entity Choices Seminar
Tax implications of buying or selling a business
Encore Dinners “A Wholistic Approach to Planning” Part 2
Be aware of revised tax benefits for higher education Be aware of revised tax benefits for higher education
Estate Taxes Encore Partners LLP Why it’s important to plan for income taxes as part of your estate plan

Newsletter Signup

    Connect With Us

    Categories

    • Encore Culture
    • Events
    • News
    • Tax Tips – Business
    • Tax Tips – Individual

    Search

    Recent Posts

    • The 2022 gift tax return deadline is coming up soon – April 18March 24, 2023 - 8:00 am
    • Changes in Sec. 174 make it a good time to review the R&E strategy of your businessMarch 17, 2023 - 8:00 am
    • Do you run a business from home? You may be able to deduct home office expensesFebruary 24, 2023 - 11:18 am
    • Key tax issues in M&A transactionsFebruary 17, 2023 - 8:00 am

    Get the latest tax and finance news

    right in your inbox

    2 + 3 = ?

    Encore Partners Logo

    Main Office
    4350 Executive Drive
    Suite 260
    San Diego, CA 92121
    858.549.7100

    Beverly Hills Office
    9595 Wilshire Blvd,
    Suite 900
    Beverly Hills, CA 90212
    310.300.8480

    © Encore Partners LLP 2021 – all rights reserved

    site design by digitalstoryteller.io

    © Encore Partners LLP 2021 – all rights reserved
    site design by digitalstoryteller.io

    Tips to Get Ready and Plan for 2020 Tax ReturnsTips to Get Ready and Plan for 2020 Tax ReturnsThe next estimated tax deadline is January 15The next estimated tax deadline is January 15 Scroll to top

    This site uses cookies. By continuing to browse the site, you are agreeing to our use of cookies.

    Accept All CookiesRefuse Cookies

    Cookie and Privacy Settings



    How we use cookies

    We may request cookies to be set on your device. We use cookies to let us know when you visit our websites, how you interact with us, to enrich your user experience, and to customize your relationship with our website.

    Click on the different category headings to find out more. You can also change some of your preferences. Note that blocking some types of cookies may impact your experience on our websites and the services we are able to offer.

    Essential Website Cookies

    These cookies are strictly necessary to provide you with services available through our website and to use some of its features.

    Because these cookies are strictly necessary to deliver the website, refusing them will have impact how our site functions. You always can block or delete cookies by changing your browser settings and force blocking all cookies on this website. But this will always prompt you to accept/refuse cookies when revisiting our site.

    We fully respect if you want to refuse cookies but to avoid asking you again and again kindly allow us to store a cookie for that. You are free to opt out any time or opt in for other cookies to get a better experience. If you refuse cookies we will remove all set cookies in our domain.

    We provide you with a list of stored cookies on your computer in our domain so you can check what we stored. Due to security reasons we are not able to show or modify cookies from other domains. You can check these in your browser security settings.

    Google Analytics Cookies

    These cookies collect information that is used either in aggregate form to help us understand how our website is being used or how effective our marketing campaigns are, or to help us customize our website and application for you in order to enhance your experience.

    If you do not want that we track your visit to our site you can disable tracking in your browser here:

    Other external services

    We also use different external services like Google Webfonts, Google Maps, and external Video providers. Since these providers may collect personal data like your IP address we allow you to block them here. Please be aware that this might heavily reduce the functionality and appearance of our site. Changes will take effect once you reload the page.

    Google Webfont Settings:

    Google Map Settings:

    Google reCaptcha Settings:

    Vimeo and Youtube video embeds:

    Other cookies

    The following cookies are also needed - You can choose if you want to allow them:

    Privacy Policy

    You can read about our cookies and privacy settings in detail on our Privacy Policy Page.

    Accept settingsHide notification only