This is a time of fear and confusion throughout the world. You may even be wondering about me and if I am still working. Let me assure you that I am fine and am working out of the basement of my house. I am eating healthy, taking vitamins to boost my immune system, getting sleep, and trying to avoid stress. I am taking these extra precautions so that I can continue working on your tax returns. However, working from home is not easy, and it is more time consuming. Getting technology up and running in itself took two days. Usually between April 1 and April 15 I push myself to the limit in order to finish up on tax returns. Since this year is not ordinary, I appreciate your patience. We will all get through this, but it will take a little while.
I’m sure you have read about the extended tax return due dates, the CARES Act and the stimulus checks, SBA loans and filing for unemployment. I have been sifting through volumes of articles and emails; some good and some giving misinformation. Things are changing so rapidly. I have received questions from some of you, so here is what I have found as of yesterday.
Both the federal and NC return deadline was extended to July 15, 2020. Penalties and interest will be waived. If you cannot file by July 15, you can file an automatic extension until October 15.
The first quarter estimated tax payment for 2020 was also extended to July 15, 2020. However, the second quarter is currently still due on June 15, 2020. Hopefully someone will realize how ridiculous this is and extend the second quarter payment as well.
For those paying for college, the FATCA Report that was due on March 31, 2020 is now due on July 15.
North Carolina has also extended their filing deadline to July 15. This includes not only individual, but also corporate and franchise taxes. The NCDOR says it will not charge penalties for those filing and paying by July 15. These changes do not apply to federal or state withholding taxes and state sales taxes.
As part of the People First Initiative, IRS has agreed to postpone certain installment payments and those in collection and limit some enforcement actions. For those who are currently in an installment agreement, payments due between April 1 and July 15, 2020 are suspended. You have the option of paying or suspending. No installment agreements will go into default; however, interest will continue to accrue on unpaid balances. All liens and levies will be suspended until July 15, 2020.
Stimulus Checks aka Economic Impact Payments
Individuals will each receive a payment equal to $1,200 ($2,400 if married filing jointly) plus $500 for each child under 18. Income must be under $99,000 ($198,000 MFJ). The payment amount decreases on income between $75,000 and $99,000 ($150,000 to $198,000 MFJ). If over these amounts, you do not qualify for payment.
While I am preparing tax returns, I am looking out for these amounts. If your income is over the threshold in 2018 but not 2019, we will postpone filing 2019 until the checks are distributed. Likewise, if your income is over the threshold in 2018 but not in 2019, we need to file your return ASAP. Please send me an email if you think your 2018 income was over the threshold but do not anticipate 2019 or 2020 to be that way.
The fastest way to get your check is through direct deposit. If you filed a return for 2018 or 2019 with direct deposit information, you will receive your money that way. The IRS says that in the coming weeks they will be setting up a portal where taxpayers can provide their banking information if it is not on your tax return.
For those that have not yet filed either 2018 or 2019, the checks are available through the end of the year. I plan on working on 2018 returns so that the filers are able to get their checks ASAP.
Paycheck Protection Program
In reading through the law, it begins with the Paycheck Protection Program. Its goal is to help businesses keep their workforce employed during this crisis. The loan amount is calculated as the lesser of: any existing loans made in February and March plus 2.5 times the average payroll incurred for the past year or $10,000,000. Proceeds must be used for payroll, health insurance, mortgage payments, rent, utilities, and interest on other debt. The SBA will forgive these loans if your workers are employed for at least eight weeks and the money is used for payroll, rent, utilities, or mortgage payments. For the portion that is to be repaid, payments will be deferred for six months. The length of the loan is two years with an interest rate of 0.5%. No personal guaranties, no collateral required. These loans are available to any small business with less than 500 employees and includes sole proprietorships and independent contractors.
You can apply for these loans through any bank, credit union, or other existing SBA lender. These loans will begin to be processed as soon as April 3, 2020. A sample of the application form and instructions is attached.
Emergency EIDC Grants may be available to small businesses and another option to consider. You must have less than 500 employees and the business must be in operation as of January 1, 2020 and you must have applied for a SBA economic injury disaster loan.
There is a provision which allows $10,000 to be advanced supposedly within three days of application. It is designed to offer relief to businesses currently experiencing a drop in revenue. The application process is simple and does not require a lot of information.
The grant must be used to provide sick leave to employees who are unable to work, maintaining payroll for those employees who can work, purchases of materials, payment of rent or mortgage, and repayment of other loans.
You can apply for the loan/grant at: https://covid19relief.sba.gov/#/.
The CARES Act extends unemployment insurance by 13 weeks. It also allows those who are not traditionally eligible for unemployment, such as those with limited work history or those who have used up all of their state benefits, to receive unemployment. Individuals are not eligible if they are able to work remotely. You also must be able to document your pay. Details on acceptable documentation to come.
The law provides for an additional amount of benefits of $600 per worker per week for up to four months.
For those that need to withdraw from their 401(k), IRAs, or other retirement plans, the law will not impose the 10% penalty for early distributions (up to $100,000). The recipient, spouse or dependent must be diagnosed with COVID-19, or the recipient must have been laid off because of COVID-19. It also allows for loans from qualified plans to be the lesser of $50,000 or 50% of vested benefits. Loan repayments are suspended for one year. For those with Required Minimum Distributions, the law waives the requirement for 2020.
Social Security Tax Credit
CARES Act creates a credit equal to 50% of qualified wages paid to employees from March 13, 2020 through December 31, 2020. It applies against the employer portion of Social Security taxes paid to all employees, including those on sick leave. The business must be either fully or partially suspended by a government order relating to COVID-19 or 2020 gross receipts are 50% or less of 2019 gross receipts.
All employers are given an extension for payment of 2020 employer social security taxes. 50% is due 12/31/2021, and the other half is due on 12/31/2022.
Hope you find this helpful and let me know if you have any questions.
In the meantime, stay well, stay safe, and stay home. This won’t be easy but we’ll get through it.
Shelley B. Drevas