Tax Changes and Proposed Relief for Taxpayers and Employers

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Tax Update 2020
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The past two weeks have been unprecedented, scary, and even a little crazy to say the least. A lot has been happening that we want to inform you about as it relates to your taxes, business, and families.

In this piece, we cover:

Federal Tax Filing Deadlines

On March 20, the IRS released a notice providing guidance for taxpayers with respect to the extension of time to file tax returns and to make certain tax payments. The details are as follows:

  • The due date for filing federal income tax returns and making federal income tax payments due April 15, 2020, is automatically postponed to July 15, 2020.
  • Payments of tax on self-employment income are included in the relief.
  • Taxpayers do not have to file a request for extension of time to file their returns to be eligible for the relief.
  • The new guidance applies to individuals, trusts, estates, partnerships, associations or corporations.
  • No extended payment date is yet provided for the second or third quarter estimated tax payments.
  • There are no extended payment dates for the payment or deposit of any other type of federal tax, or for the filing of any federal information return as of this time.
  • Unlike the prior guidance issued Wednesday, March 18, the $1-million limit for individual and the $10-million limit for corporation payments have been lifted.

It is expected states will follow the federal extension. So far, New York, California, Colorado, Iowa, Maryland, and Connecticut have indicated their intention to do so. Please note that each state is independently reviewing and updating its processes regarding penalty and interest abatements and not all states may follow federal guidance or processes. Please review your state if not one of these listed.
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CARES Act

Phase three of the recent Corona Virus Aid, relief, and Economic Security (CARES) Act is currently being debated within the powers in Washington, DC. As of the submission of this email, this bill before the Senate has NOT been approved.

The proposed bill builds upon an earlier version of the CARES Act and is intended to be the third round of federal government support in the wake of the coronavirus public health crisis and associated economic fallout. The CARES Act builds on the two former pieces of legislation by providing more robust support to both individuals and businesses, including changes to tax policy. Comments over the weekend indicated this bill would offer cash refunds to individuals with income levels up to $75,000 (single) and $150,000 (married), with phase-outs over these amounts and additional advances for children.

Phase three also indicates $300 billion in small business loans (as defined – Employers under 500 employees) and $150 billion to specific industries, including hotels and shopping malls (among others) and also guaranteed money market mutual funds. It is expected that this program will operate through the SBA loan/guarantee program, in conjunction with your local bank.

This bill may change before it’s released. We will keep you up to date on new developments when they are passed.
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Paid Leave for Employers and Employees

The U.S Department of Labor’s Wage and Hour Division recently released the “Families First Coronavirus Response Act: Employee Paid Leave Rights (FFCRA).” This Act requires certain employers to provide employees with paid sick or family leave for specified reasons related to COVID-19. The Division administers and enforces the new law’s paid leave requirements, that will apply from the effective date through December 31, 2020.

How this might this Act impact your family or business?
Under the FFCRA, an employee qualifies for paid sick time if he/she is unable to work (or unable to telework) due to these reasons.

Employees:

  • Two weeks (up to 80 hours) of paid sick time at the employee’s regular rate of pay where the employee is unable to work because the employee is quarantined (pursuant to Federal, State, or local government order or advice of a health care provider), and/or experiencing COVID-19 symptoms and seeking a medical diagnosis; or
  • Two weeks (up to 80 hours) of paid sick time at two-thirds the employee’s regular rate of pay because the employee is unable to work because of a bona fide need to care for an individual subject to quarantine (pursuant to Federal, State, or local government order or advice of a health care provider), or to care for a child (under 18 years of age) whose school or child care provider is closed or unavailable for reasons related to COVID-19, and/or the employee is experiencing a substantially similar condition as specified by the Secretary of Health and Human Services, in consultation with the Secretaries of the Treasury and Labor; and
  • Up to an additional 10 weeks of paid family leave at two-thirds the employee’s regular rate of pay where an employee, who has been employed for at least 30 calendar days, is unable to work due to a bona fide need for leave to care for a child whose school or child care provider is closed or unavailable for reasons related to COVID-19.

Employers:
The paid sick leave and expanded family and medical leave provisions of the FFCRA apply to certain public employers and private employers with fewer than 500 employees.

Small businesses with fewer than 50 employees may qualify for exemption from the requirement to provide leave due to school closings or child care unavailability if the leave requirements would jeopardize the viability of the business as a going concern.
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Payroll & Paper Checks

At this time, employers should consider transitioning to direct deposit to pay employees. Your business and team could face hardships as additional restrictions may be enforced locally or at the state or national level. If you need help setting up direct deposit for your employees, please let us know.
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Bank Debt & Financials

If your business currently has any loans outstanding with a bank, we urge you to call your banker and at a minimum tell them you are still open for business and remind them who you are. Don’t take for granted that you have a loan with the bank they know who you are. In addition, you should ask the banker what options they may have for you to convert some of your bank debt to interest-only terms for the next three to six months. If you don’t ask, they won’t offer it to you. In addition, you should inquire of your banker what documents they may need in advance to begin any process of the above-referenced bills with regards to any SBA Loans/guarantees. Whereas the bill is not official or formalized as of yet, it is better to be proactive and ahead of the masses to make sure you are taken care of first!

If you need additional financial information from us, please let us know ASAP so we may upload any documents needed to your portal for your bank, surety, or other creditors.

If you find yourself having trouble navigating any business loan process, budget updates, forecasts or are in need of any year-end financial statements you have not previously requested of us, please contact us. If you need answers on fixed costs vs. variable costs, overhead, profit, cost-cutting measures, etc. we work in this field every day, you work in your area of expertise every day. Let us be a resource to you when you need it most. Open communication today is more important than ever.
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Personal/Commercial Mortgages

As interest rates on the 10-year treasury have also dropped, you may be rushing to refinance. As a reminder, we CAN NOT simply forward your tax returns to third parties (i.e., bankers/mortgage brokers) without your express written permission. You can find our consent forms at https://langallancpa.com/forms/.
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How to Avoid Falling Victim to Scams

Unfortunately, when times get tough, people will look to take advantage when they can. It is important for you to also review these items with your parents and adult children. Don’t take it for granted they understand what to do or not to do!

Reminders:

  1. Follow your company’s IT policies first and foremost!
  2. The IRS does NOT contact you via email or a phone call.
  3. State Revenue agents (i.e., from the state you LIVE IN) also do not call you or contact you by email or a phone call.
  4. Do NOT allow someone to enter your home, claiming to test you for Coronavirus. Watch and listen to your local STATE GOVERNMENTS for these notices.
  5. Do not be fooled by someone requesting money from you as your grandchild is sick or in quarantine.
  6. DO NOT answer robocalls and DO NOT press any numbers.
  7. If someone calls you and asks you to “verify who you are” by asking you to confirm your address/social security number, username and/or PASSWORD ask for their number, hang up, and call back. Your credit card, bank debit card, mortgage, brokerage accounts are credible creditors at this time and they all have a phone number on either the cards or statements you receive from them to call them back.
  8. DO NOT open emails and select links re: Coronavirus from persons/companies you don’t know. If you want official information contact the Centers for Disease Control and Prevention and/or the World Health Organization directly.
  9. DO NOT open attachments from people you don’t know. In addition, scammers are “spoofing” senders to be names you may know. If you hover your cursor over the “senders name” in the email you received, it should tell you their actual email, WITHOUT clicking on the email message.
  10. And LASTLY – no one from our office will call you to ask your social security number or to file your tax return without the proper e-file authorization forms, which you will receive from us directly in the mail or via your portal. If you are a new client to us, we will have this information provided by a copy of your prior year’s tax return, which YOU SENT TO US.

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Investments

We have all been affected by the Coronavirus financially in the recent market. I strongly urge you to discuss with your broker/financial advisor your strategy and your portfolio allocations. Given recent events, you should discuss with your broker/financial advisor if harvesting tax losses is a wise strategy with the long-term objectives still in mind.
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