Tax Update amid Virus Outbreak 3
March 30, 2020
Dear Friends and family,
It has been another week of unprecedented…maybe you can fill in the blank! As the virus has continued to spread across the country lawmakers continue to chase answers to keep some measure of commerce and stem the course of economic downturn.
Tax Headlines
Federal Tax:
The second (third or whatever they are calling it) round of relief was passed by the House Friday and signed by the president. In addition to stimulus, business relief and other things, these tax highlights are from the CARES Act:
- Payments for all!! But not so fast. Recovery rebates of $1,200 for individuals, $2,400 for joint tax filers and $500 credit per child. Rebates are phased out at certain income levels. This will be determined by your 2018 return if your 2019 return has not been filed.
- You may now withdraw up to $100,000 from your IRA without penalty for an individual with a Covid-19 diagnosis (with an approved test) or an individual who experiences adverse financial consequences. Withdrawals are subject to tax which can be paid over a three-year period.
- Employers may defer paying payroll taxes from the date of the Act until December 31, 2020. Then, 50% of the tax is due prior to December 31, 2021 with the remaining 50% due December 31, 2022.
- Frist and second quarter estimated tax payments will be due in one payment, October 15.
Other items of note not specifically addressed in the Act:
- Other tax returns due after April 15th, specifically all non-profit information returns typically due May 15th are still due May 15th. The deadline has not been changed.
- Any fiscal year taxpayer with returns due after April 15th are still due on the original due date.
Many of you have asked about your IRS installment agreements for past tax debt. Currently, there is no postponement of installment payments.
District of Columbia:
The District has changed its filing deadline from April 15th to July 15th. However, your 2020 estimated payments are still due on their regular payment due dates.
Virginia:
Virginia has not changed its filing deadline. Pressure is mounting Mr. Governor.
Small Business Developments
We are privileged to work with many of you and your small businesses. We too are small business. There is a symbiotic relationship with all of us. So, I have very purposely used the We are all in this together tag line to sign-off because I sincerely believe that.
There is a lot of relief for small business in the CARES ACT. I have read all (ok, most) of it. With each measure of relief there will be some measure of reporting that comes with it. As addressed above, business can delay paying payroll taxes for more than a year. How are we going to track that and make sure cash is available 18 months from now to pay the nugget? Many of you have asked about the SBA loan developments. There are two phases. The CARES ACT allows for a complete forgiveness of one of the loans if certain criteria are met, then there is an application process for forgiveness that requires documentation, including financial statements.
We also have CFO level tools in place to assist with risk analyses and mitigation, project revenue, budget for expenses, capital prioritization and project cash flow including what the infusion of loans and subsequent repayments, forgiveness etcetera. And we love this stuff!
We are currently developing and plan to roll-out a project tool to help manage all of these ideas. This tool will allow us to help guide you through things like SBA Loan applications (Right now the SBA is not prepared for the onslaught that is coming), cash forecasting, social media presence, employee retention and business planning for what comes when business returns. This looks a bit different for all of you. We are here to help! Details to come!
We are all in this together,
Shawn G. Sumrall, CPA
Guiding those we encounter to success.