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The Moving Targets of COVID-19 Financial & Tax Deadline Relief

We are sharing brief updates and resources that may be helpful as you navigate through the current health and economic crisis. If you prefer not to hear from us on these matters, simply reply to this message with unsubscribe in the subject line.

Since our last newsletter the IRS individual rebate page has been moved and enhanced, more due dates have been extended, PPP loans have emerged as the hot item, FAQs have been issued on payroll tax credits, additional state and local resources and programs have been added, and scam artists have gotten active. Our emphasis continues to be on helping you get the cash flow you need now.

We have sorted links and information below by national, California, and local (select cities).

NATIONAL

The latest on economic impact payments for individuals

The IRS expects to start direct depositing rebates, now referred to as economic impact payments, this month (April). Payments will be $1,200 per individual and $500 per child (under 17) for taxpayers with AGI under $75,000/$150,000 (single/married filing joint).

The IRS has a new webpage for getting the latest information on the payment. The page linked in our last newsletter has been removed. This new page also includes a button (still under construction) for inputting or updating your direct deposit and/or mailing information, and a button (active) for non-filers to use.

  • IMPORTANT:  SCAM WARNING
    • The IRS will NOT be calling, emailing or otherwise contacting you for your bank account information. For those who did not provide direct deposit information on a recent tax return, the IRS will soon have a secure process. Do not trust anyone trying to get personal or bank information from you.

What about dependent full-time students 17 and older?

  • It appears that neither the parent nor the student will receive this benefit.
As of April 10, Treasury and the IRS have extended hundreds of tax filing, payment and administrative due dates; including Q2 estimated taxes and 1031 exchange deadlines

IRS Notice 2020-23 attempts to cover all federal obligations due to be performed April 1, 2020 through July 15, 2020 that had not yet received an extension to July 15.

  • Second quarter estimated taxes normally due June 15 are now due July 15.
  • Any estate, gift or fiscal year tax filing due within the range is now due July 15.
  • Any 45 and 180 deadlines for 1031 exchanges that would otherwise expire in the April 1 through July 15 time frame should now be extended to July 15.
    • Periods that expire March 31 or before, or July 16 and later, are NOT extended.
  • The period of April 1 – July 15 will generally be disregarded in calculating interest or penalties.
The government is working to remove barriers to testing for and treatment of COVID-19
  • Testing should be available at no cost to you.
  • The IRS has loosened restrictions so that no-deductible cost coverage may be available even if you are enrolled in an H S A compatible High Deductible Health Plan. You will have to check with your plan for the precise rules that apply to you.
  • https://www.irs.gov/pub/irs-drop/n-20-15.pdf
Businesses should be applying for Paycheck Protection Program (PPP) loans

As noted in our last newsletter, the PPP is basically a really sweet working capital loan that will be mostly forgivable if you jump through the right hoops.  Applications for most businesses have already started; applying early should increase your chances of getting in on the program.

  • Sole proprietors and independent contractors
    • Applications for sole proprietors and independent contractors start April 10th.
  • Partnerships
    • Lenders have been allowing businesses with working partners to treat their share of earnings as additional salary. Be sure to ask your lender.
  • Finding a lender
    • In general, you will have the best chance of obtaining a loan by using a bank with which you already have a working relationship. Some banks, however, are either severely limited in how many applications they are allowed to process, or struggling to get the program implemented. The SBA provides a search tool for finding approved lenders on their website.

An easy to read and comprehensive overview of PPP loans, including information on how to coordinate PPP loans with $10,000 emergency disaster loans:

Delay of employer payroll tax payments

Businesses not receiving specified benefits (below) may defer their social security matching employment taxes (the 6.2% piece) for the period March 27, 2020- Dec 31, 2020, as follows: 

a.    50% due on Dec 31, 2021 and

b.    50% due on Dec 31, 2022.   

What businesses are not eligible?

  • Businesses are not eligible for the deferment if they receive loan forgiveness under the Paycheck Protection Program (above). If you have a PPP application in process, you should not take advantage of this postponement.
IRS provides FAQs: Employee Retention Credit under the CARES Act
IRS provides FAQs: COVID-19-related tax credits for required paid leave provided by small and midsize businesses
Treasury delays excise tax (alcohol, tobacco, firearms and ammunition businesses) payment and reporting for businesses hurt by COVID-19

90-day extension

Student loan payments deferred / 6-month zero interest period

FAQ page from the Department of Education

Reminder: required minimum distribution (RMD) rules have been suspended

No RMDs are required for 2020.

Exclusion for employer-paid student loans

Employer paid student loans after March 27,2020 and before January 1, 2021 may be excluded from the employee’s gross income. The maximum for employer educational assistance payment exclusions is $5,250 per individual per year.

Key federal resources for taxpayers

CALIFORNIA

Statewide extensions and payment plan for sales & use taxes + fees

Most small businesses now have until July 31st to file first quarter sales and use tax returns, as well as to make various other fee program payments and filings. 12-month payment plans also are also available for certain small businesses.

State guaranteed loans for small businesses

Loans of up to $50,000 for small business (1-750 employees) and eligible non-profit borrowers.

Unemployment benefits have been expanded and increased

Individuals previously excluded are now eligible to apply, and benefit payment amounts are increasing.

Key resources for California taxpayers

LOCAL

City of Oakland Small Business Emergency Grants seeded with $300,000 from the recently established Oakland COVID-19 Relief Fund.
San Francisco commits $9 million to launch Zero Interest Loan Fund

The city also added $1 million to the City’s Resiliency Fund, increasing support for workers and small business.

San Rafael announces grants ($5,000)

For local small businesses whose sales dropped 40% or more; updates should soon be available on the city webpage.

Lawrence S. Smith, CPA
1527 5th Avenue, San Rafael, CA   94901
82 West Portal Avenue, San Francisco, CA  94127
Tel 415-458-5100
Fax 415-458-5105
smith@smithcpas.com

DISCLAIMER

While we hope the contents of these alerts are helpful to our clients, these alerts are not intended to be advice upon which you should rely. Tax advice contained in these alerts is not intended to be used for, and cannot be used for, the purpose of avoiding penalties under the US federal tax laws. Inclusion of topics outside the scope of our normal service areas is intended to serve solely as a general starting point and should not replace consultation with experts in the related fields.

NOTE: Links to resources are evolving and often get moved or updated. While we have attempted to link to the most recent pages, we cannot guarantee how long any link will remain active.

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