The U.S. Treasury Department is monitoring the CERTS funding questions that are coming in through its email and its phone lines. United Motorcoach Association officials have also had the opportunity to highlight some of the questions UMA is receiving. As a result, on June 29, Treasury released some new Frequently Asked Questions (FAQs) with answers. Here are the ones that address issues that have tax implications.
The new FAQs are listed briefly below:
1. There are three situations described for how to handle Form 941 that do not agree with the applicant’s name and tax identification number. They are:
- If a company uses a Professional Employer Organization, the company must upload a form letter signed by the PEO to validate the number of employees and compensation for the first quarter of 2020.
- If a company’s employees are paid under a consolidated company name, it must upload copies of the Form 941 linked to the consolidated entity.
- If a company is a holding company, the company must upload the Form 941 related to the operating company.
2. Main Street Lending Program loans are not reportable on the Coronavirus Economic Relief for Transportation Services(CERTS) grant application.
3. Changes have been made to ask the applicant if the included tax returns are for a calendar or fiscal year. If a company is a fiscal year (not January through December) reporter, the company will need to provide revenues on both a calendar year and fiscal year basis.
4. The answer to the average annual employees in 2019 should include only employees whose wages were reported on W-2 forms. Do not include the number of independent contractors in this number.
5. CERTS grants received may be used to pay independent contractors.
6. The system validation message displayed after the principal business activity code has been changed to read “Please make sure the Principal Business Activity Code entered matches the code as it was entered on your 2019 tax return, and then proceed with completing the application.”
7. Companies formed in U.S. territories (Guam, Puerto Rico, the U.S. Virgin Islands, American Samoa and the Commonwealth of the Northern Mariana Islands) are eligible for the CERTS grant.
To see all FAQs, visit https://home.treasury.gov/system/files/136/CERTS-FAQ-June-17-2021.pdf.
Taxation issue unclear
There has also been some discussion of whether the CERTS grant is taxable. At this time, there is no language in the CERTS Act to exclude any grant received from gross receipts or taxation.
The CERTS grant must be spent on payroll and operating costs (which are tax-deductible) within one year of receipt of funds or returned. In that case, the CERTS grant revenues and the tax-deductible expenses will net out to zero. The IRS has not addressed CERTS grants specifically at this time.
UMA member Tracy Fickett, CPA, operates BUSBooks, a specialty accounting firm dedicated to the motorcoach industry. If you have a question, you can reach her at email@example.com.