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One, Two, Three New Pieces of Legislation in Two Months

Part of being a consultant and tax person is knowing where to look or who to call.  What we don’t know, we will find out for you.  We have committed a team to study the new law and how we can effectively provide beneficial information for our clients.  Our management services group is focusing on the SBA loans and cash flow issues. https://hogantaylor.com/COVID-19/

Due date of April 15 changed to July 15:

  • Tax filings for 2019,
  • Tax payments for 2019 and 2020,
  • Funding of 2019 HSA, IRA or retirement plan, with
  • No interest or penalties charged for extra days.

You are entitled to file earlier, especially if the return has a refund.  Don’t delay organizing your tax information.  If there is a balance due, 90 additional days will provide an extra cushion of time to organize your finances. Texas, Arkansas and Oklahoma are three states following Treasury’s change. Resources regarding updates to dates, forms and payments:  https://www.irs.gov/newsroom/tax-day-now-july-15-treasury-irs-extend-filing-deadline-and-federal-tax-payments-regardless-of-amount-owed

https://www.irs.gov/coronavirus

Rebate check or deposit of $1,200: For individuals

  • with income below $75,000*,
  • with a social security number,
  • not claimed as a dependent, with
  • an increase of $500 for each child reported on their return.

*Partial payments for those with income up to $90,000. The deposit will be made to the account provided on Form 1040 previously.  If not provided, a check will be sent.  If a taxpayer has moved or changed banks, the IRS should be notified of the new address with Form 8822. https://www.irs.gov/pub/irs-pdf/f8822.pdf A portal will soon be established to allow taxpayers to add banking information.  If returns weren’t filed in 2018 and 2019, taxpayers can enter their information at the following site. https://www.irs.gov/coronavirus/non-filers-enter-payment-info-here

Mandatory paid sick and/or leave time for small employers:

Sick Pay: Effective April 1, employers with an employee count of less than 500 must pay employees for their absence due

  • to their sickness,
  • the sickness of a family member or
  • the absence of childcare.

For current employees, they will be paid 80 hours of sick time* up to $511 per day for their sickness or 2/3rd of pay up to $200 per day for caregiving or childcare.

Extended leave: For employees with at least 30 calendar days with the employer, they will be entitled to an additional 10 weeks of leave to provide childcare at 2/3rd of their current wages* with a limitation of $200 per day.

*Employers with less than 50 employees are not required to pay for leave under FMLA or sick leave the first two weeks for childcare issues.  https://www.dol.gov/agencies/whd/pandemic

Employers are entitled to reimbursement by reducing their employer payroll tax deposits and payments; no waiting for filing their annual return.  If the credits exceed the payroll tax, a refund can be requested. Draft forms and instructions are available at https://www.irs.gov/forms-pubs/about-form-7200

For sick time payments up to

  • $511 per day for ill employee or
  • $200 per day for employees providing care giving services.

For leave time, the payments can be up to

  • $200 per day limited
  • $10,000 per employee.

Wages up to $10,000 paid after March 12 will generate a 50% credit when

  • Business is suspended or limited due to government mandates or
  • Revenue decrease over 50% from the same period last year and
  • Did not receive a loan for small business interruption.
  • For employers with 100 or less employees, all wages paid would qualify.
  • For employers with more than 100, wages paid for services WILL NOT qualify.
  • Wages include health care benefits and employer portion of Medicare taxes.

Payment Delays: Payment of employer taxes and half of self-employment taxes, after credits, incurred in the remainder of 2020 can be delayed.  Half of the tax will be due on December 31, 2021 with the other half due December 31, 2022.  Those with debt forgiveness with SBA will not qualify for this deferral.

Other items included:

Medical

  • High deductible plans can waive or lower deductibles for treatment of the virus.
  • OTC medicine cost in 2020 can be reimbursed through medical plans, HSA or FSA.

Retirement plans

  • Required minimum distribution payments are not required in 2020.
  • Retirement plan distributions in 2020 up to $100,000 can be received without penalty.**
  • The distribution can be recognized over a three-year period or repaid within the same period.
  • Loans up to $100,000 from retirement plans can be obtained in the remainder of 2020 with the first payment delayed for one year.**
  • Delay of funding contributions by employers until January 2021.
  • Change in matching contributions and safe harbor elections if operating at an economic loss.**

(** Plan amendment and notification required)

Business income, losses and expenses

  • Net operating losses originating in 2018-2020 are subject to a five-year carryback. Those same losses will not be subject to the 80% limitation on use of the loss.
  • Excess business limitations will not apply for tax years 2018 to 2020
  • Business interest limitation was increased from 30% of income to 50%.
  • Forgiveness or cancellation of an SBA loan will not be taxable.
  • Qualified tenant improvements now qualify for bonus depreciation.

Contributions:

  • For 2020, individuals are not limited to a percentage of adjusted gross income (60%) on the deduction for charitable contributions and the corporate contribution limit is increased from 10% to 25% of income.
  • Individuals can deduct $300 of charitable contributions in addition to the standard deduction.

Unemployment Provisions:

  • Includes unemployed, partially unemployed and self-employed
    • Resulting from COVID-19
    • Personal sickness or quarantine
    • Caring for a family member
    • Child-care due to school or daycare closing
    • Business closing
    • Employment option unavailable due to the virus
  • Benefits available
    • For a maximum of 39 weeks
    • In the period from January 27, 2020, to December 31, 2020
    • In addition to state benefits, you will receive a weekly $600 Federal benefit
    • Still taxable income (Consider tax withholding on the payments)

Credit protections, eviction protection and mortgage payment deferrals

  • Credit report protection when a payment deferral from creditor is received.
  • If current on mortgage payments at February 1, a delay of payments may be requested
    • 180-day hold for payments on federally backed homeowner mortgages,
    • 90-day hold for payments on federally backed mortgages on multifamily properties resulting in corresponding 120-day protection for renters.

Enacted in 2001 after 9/11, a special code section is triggered upon declaring a national emergency; employers can reimburse certain employee expenses without a plan, reporting them as payroll or discrimination testing. Call us for details.