Most years, we as CPAs ask our clients located in Virginia to hurry up and get us their information, but then wait to file their returns. Why does this happen? One of the reasons is that the Virginia General Assembly meets annually in January and decides on Virginia’s conformity to new federal legislation. Once legislation is passed, it takes time for the Virginia Department of Taxation to update programs to accept returns which can delay filing for weeks. We have seen major changes in legislation over the last several years which has made this process more stressful on CPAs and their clients.
This year’s conformity situation is more complicated than usual due to the tax provisions included in the federal CARES Act and the Consolidated Appropriations Act (signed into law on December 27, 2020). We have learned that Virginia does not intend to conform with all of the provisions which is making it difficult to adequately help our clients plan for their state tax liability.
The most controversial issue we foresee is the deductibility of expenses that were used to obtain PPP forgiveness. The House finance committee is currently developing a plan that provides some benefit to small businesses while taking into consideration the impact on the state budget. We will be regularly monitoring legislation to keep you informed on developments, but if you prefer to follow on your own, please click on the following links:
Please contact us if you have questions or concerns.