Pub. 2 2020 Issue 6

• Required withholding starts in the pay period in which wages and compensation paid to an employee exceeds $200,000, regardless of filing status and wages paid to the employee by another employer. • An employee cannot request that additional amounts be withheld specifically for additional Medicare tax but can increase Federal income tax withholding with any excess income tax applied to other taxes due (including additional Medicare tax) upon the filing of the employee’s income tax return. 5. Employers do not have an obligation to withhold taxes for the 3.8% Medicare Contribution tax. However, employees may elect to increase their Federal income tax withheld to account for these taxes to be applied appropriately upon filing their income tax return. REPORTING FOR DEMONSTRATORS For the Year Ending December 31, 2020: As of January 1, 2002, IRS Revenue Procedure 2001- 56 sets forth the requirements for a dealer to report demonstrator vehicles provided to their employees. Be sure that appropriate amounts are included in each employee’s gross wages. The total 2020 inclusion amount should be reflected in box 14 of each employ- ee’s Form W-2. For the Year Ending December 31, 2021: • For January 2021, continue to use daily inclusion amounts calculated under the Annual Average Look Back Method based upon your December 31, 2019 factory financial statements (the amount used in 2020). • Once your December 31, 2020 factory financial statements are completed, you must recalculate your daily inclusion amounts under the Annual Average Look Back Method. • Apply the new daily inclusion amounts beginning in the first reporting period for February 2021. NOTE: Please see NADA Management Guide L.17, Federal Tax Treatment of Demos (June 2002). BUSINESS TAX UPDATE De Minimis Safe Harbor Election: This annual election allows for the expensing of low-cost assets up to $5,000 for entities with audited financial statements, or $2,500 for all other entities. Items within the scope of the de minimis safe harbor election are treated as deductible expenses and not depreciable capital assets. BET and BPT Tax: The New Hampshire Business Enter- prise Tax (BET) is currently imposed at a 0.6% rate for 2020. Business Profits Tax (BPT) rate is 7.7% for 2020. §179 Limitation: For 2020, the §179 limitation amount is $1,040,000 for Federal ($500,000 for NH). The §179 deduction is reduced dollar for dollar for qualifying prop- erty placed in service during the tax year that is in excess of $2,590,000. This is an entity by entity limitation, not an aggregate limitation. Bonus Depreciation: For 2020, taxpayers that have floor plan financing interest that is taken into account under sec- tion 163(j) business interest expense limitation are disqual- ified from taking bonus depreciation. However, see Reg 1.168(k)-2 and NADA Headlines (9/16/19) to see if you may still qualify for bonus depreciation for federal. NH does not conform to bonus depreciation. Luxury Automobile Depreciation Limits: For vehicles placed in service in 2020, with a gross vehicle weight of under 6,000 lbs., the maximum first-year depreciation allowed is $10,100 without bonus depreciation and $18,100 with bonus depreciation. Paycheck Protection Program (PPP) Loans: Presently, per IRS Notice 2020-32, no deduction is allowed for federal tax purposes for the payment of an expense that results in PPP loan forgiveness. The Treasury is expected to issue guidance soon for borrowers with expenses paid in one year and forgiveness received in a later year. Continue to monitor legislation for changes to this rule, as several Congress members have voiced support for deductibility of PPP expenses. Continued on Page 20 N E W H A M P S H I R E 19