Dear Clients and Friends,
As the coronavirus Covid-19 crisis continues to affect us, our local communities and global economies, you may have concerns about your financial well-being. Or you may be wondering about how recently passed legislation impacts you and your business enterprise. I’m providing a high-level summary of some of the key highlights from the past week related to tax, financial and economic news developments and recommend discussing your circumstances with me in more detail.
When will the US economy be re-opened? The best news of the week related to the economy may be from Treasury Secretary Steven Mnuchin, quoted on CNBC this morning, who said that he believed it was possible that the U.S. could open back up next month. “I think as soon as the president feels comfortable with the medical issues,” Mnuchin added. Let’s hope. I’m learning not to make any predictions about any of this. President Trump earlier said he hoped that Americans would be able to pack churches by Easter, though the administration later released guidelines calling for social distancing to continue at least through the end of April. Trump declined to provide a date for a re-opening during a White House briefing on Wednesday. Trump is already stepping up efforts to re-open the economy. The president is planning to create a second task force designed to focus on the response to the economic devastation that COVID-19 has wrought, a senior administration official told NBC News. Experts have cautioned that the re-opening process could be a long one.
Banks accepting Payroll Protection Program (“PPP”) loan applications: The Paycheck Protection Program, created under the stimulus package, offers small business owners federally backed loans that will be forgiven if the money is used to keep employees on payroll. It also fits for certain self-employed individuals, sole proprietors, and independent contractors whose business will be adversely impacted by Covid-19. PPP has been off to a rocky start since it debuted last Friday, with many small businesses complaining that getting access to the promised loans has been nearly impossible. The banks, understandably, are overwhelmed by the demand for this program. Which bank to use? The program is opened to all banks not only those registered with the SBA. Most banks see this as a business opportunity and are taking applications. I suggest first sticking to the bank you regularly do business with. Although not all banks are requiring an open account to apply, so if you’re not happy with your bank’s service, you may wish to try another. I’m not yet aware of anyone who has received loan funding yet, for either program, but I know of several applications that I have been involved with this week that have been accepted and are being processed. Treasury Secretary Steven Mnuchin notified congressional leaders yesterday of its request to approve $250 billion in additional funds for this small business loan program that has been swamped by overwhelming demand.
The SBA Economic Injury Disaster Loan (EIDL) is another SBA loan program being offered, as a business loan at favorable SBA lending terms designed to get a business or other self-employed individual through the next year. SBA is providing advances of up to $10,000 on EIDLs for businesses experiencing a temporary loss of revenue and this loan advance does not have to be repaid. Apply at www.sba.gov/disaster. Important note: If you applied previously by upload paper forms a few weeks ago, you are required to apply again through the on-line streamlined application process to request the $10,000 advance. SBA, not the banks, is the direct lender.
As expected, the devil is in the details so contact me for assistance with your applications or to talk through whether either of these loan programs fit your situation..
Recovery Rebate checks to be issued SOON: The first wave of payouts for 50 million Americans begins hitting bank accounts TODAY according to the Treasury. This first wave will be issued to people who have already given their bank account information to the IRS who filed a tax return with direct deposit information. The IRS announced Monday that most qualifying taxpayers will receive recovery rebate payments automatically within the next three weeks without having to take any action. The economic stimulus payments, or recovery rebates, will provide eligible individuals with an economic impact payment of up to $1,200 for individuals or $2,400 for married couples. Parents also receive $500 for each qualifying child. The payments phase out for individuals with adjusted gross income over $150,000 for married taxpayers filing jointly, $112,500 for taxpayers who file as head of household, and $75,000 for other individual.
For taxpayers who have already filed their 2019 tax returns, the IRS will use this information to calculate the payment amount. For those who have not yet filed their 2019 return, the IRS will use information from their 2018 return to calculate the payment. The economic impact payment will be deposited directly into the same bank account used on the return. For taxpayers for whom the IRS does not have direct deposit information, Treasury plans to develop a web-based portal so that individuals can provide their bank information to the IRS online, so that individuals can receive electronic payments. Otherwise, those individuals will receive checks in the mail in May through as late as September.
Social Security recipients will automatically receive stimulus payments. Treasury announced Wednesday that Social Security benefit recipients will receive economic stimulus payments automatically without having to file a tax return.
Beware of Scams; phone and email phishing! IRS will not be calling you or emailing you to inform you of your eligibility to receive a stimulus payment in exchange for your personal information or direct deposit banking info. Not happening.
Unemployment benefits: For those of you who have been laid off or furloughed and are clearly entitled to benefits, you know the horror that is trying to get your claim processed by the state unemployment division. The system is overwhelmed and NV Governor Sisolak begs us to be patient and affirms that benefits will be retroactive. The big news is the additional 13 weeks and $600/week of benefits granted by the feds on top of your state assistance. My interest has been focused on the new expanded eligibility for the self-employed (e.g. gig economy workers, Uber drivers and other freelancers). The state has yet to open this part of the program and define eligibility parameters. Go to https://detr.nv.gov/Page/COVID-19_(Coronavirus)_Information_for_Claimants_and_Employers for news updates. I tried this morning at the FAQ link and couldn’t reach the page. Super. Stay tuned.
July 15 is the “new April 15”; IRS extends deadline for filing 2019 personal tax returns and paying taxes owed: Good deal and much needed. Many of the IRS processing divisions and phone service lines are suspended, which will inevitably slow down certain operations. However, IRS is processing taxpayer refunds as normal. I’ve received reports this week from clients receiving their refunds via direct deposit quickly (with 10 days or so after e-filing). So, no reason to wait too long to file those 2019 tax returns if you have money coming back. I saw a statistic that 33% of those surveyed procrastinate on their taxes. Well, this Coronavirus shut down might give you time to organize your finances earlier this year! The first quarter individual tax estimates, which are typically due on April 15, were also deferred to July 15. The second quarter tax estimate usually due on June 15 has also been extended to July 15. For some of us, July 15 will be the triple-whammy: year 2019 and first and second quarter 2020 estimated tax. Budget accordingly to avoid late pay penalties!
IRAs and Health Savings Accounts (HSA): The deadline to contribute to these accounts toward year 2019 has also been extended to July 15. A great opportunity to maximize your tax-deductible contributions, especially if you are in a high tax bracket for 2019.
Retirement plans and IRA RMDs: Taxpayers can take up to $100,000 in coronavirus-related distributions from retirement plans without being subject to the 10% additional tax for early distributions. Eligible distributions can be taken up to Dec. 31, 2020. Coronavirus-related distributions may be repaid within three years. Any resulting income inclusion can be taken over three years. The new tax bill also allows loans of up to $100,000 from qualified plans, and repayment can be delayed. The bill also suspends the required minimum distribution rules for 2020. If you haven’t taken your RMD yet, don’t, until you talk to your advisers. It may make sense to delay it if you don’t need the cash, especially given the downturn in the stock market.
During this unpredictable and challenging time, it’s more important than ever to stay connected. We’re in this together and my thoughts go out to all who have been impacted by this unprecedented situation. I’m here to serve you and help with your questions, please don’t hesitate to contact me.
Eric Johnson CPA