The Rules Keep Changing: What You Need to Know About PPP Loans

The Rules Keep Changing: What You Need to Know About PPP Loans

With new legislation being debated and constantly updated, it seems, the rules regarding Paycheck Protection Program (PPP) loans and loan forgiveness keep changing. So the current advice from experts is: Don’t rush into anything!

Congress is currently trying to work out a new COVID-19 relief package before going on recess, which is scheduled for August 8. Part of the discussions may include changes that relax the forgiveness requirements for the smallest loans, possibly those up to $150,000.

The SBA notified lenders that it would not even begin accepting PPP forgiveness submissions until new software goes live. And the expected launch date of August 10 could be delayed if new legislation changes the forgiveness process. So lenders cannot finalize their “forgiveness portals” until the SBA has finalized theirs.

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More than 4.8 million businesses and organizations took out PPP loans through June 30, 2020. Recent legislation extended the chance to apply for a PPP loan through August 8. And new legislation may provide the opportunity to apply for a second PPP loan. Stay tuned for details!
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The Various Deadlines

Remember, you have up to 24 weeks to use your PPP money. And since payroll costs are a significant component of PPP forgiveness, you may need to wait until your payroll provider has time to develop reports that are customized to comply with PPP guidance. The other important deadline in the PPP forgiveness process comes 10 months after the end of your loan’s covered period. At that point, if forgiveness forms have not been submitted, the funds officially become a loan that needs to be repaid.

What’s more, the SBA has not yet answered questions with regard to some specific considerations, including which types of utility expenses are forgivable, how FTE employees are treated when fired for cause, determining 2020 vs. 2019 income for self-employed borrowers, and which documents are required for submission and which are required to be retained.

Keep Your Paperwork in Order

With plenty more details to come on this subject, we’ll be sure to keep you updated as the information changes. In the meantime, take steps to prepare for the forgiveness application process by documenting how the loan proceeds are used. Gather any materials you will need to support non-payroll expenses, such as mortgage interest, rent or lease payments, and utilities. And please contact us with any questions you may have about your current situation.

No Changes to Auto Depreciation Limits

According to the IRS, there will be NO CHANGES to the limitations on depreciation deductions for passenger automobiles first placed into service in 2020.

For cars, trucks and vans that are acquired after Sept. 27, 2017, and placed in service during calendar year 2020, the depreciation limit is:

  • $18,100 for the first tax year;
  • $16,100 for the second tax year;
  • $9,700 for the third tax year; and
  • $5,760 for each succeeding year.

When no Sec. 168(k) bonus first-year depreciation deduction applies, the depreciation limit is only $10,100 for the first tax year, with succeeding years the same as above.

 

MONEY BRIEF #1

Did you know that teachers and other educators can deduct certain unreimbursed expenses on their tax returns? To be eligible, you must be a K-12 teacher, instructor, counselor, principal or aide, and you must work at least 900 hours during a school year. You can deduct up to $250 of business expenses that were not reimbursed (be sure to keep your receipts) for:

  • Professional development course fees
  • Books
  • Supplies
  • Computer equipment, including related software and services
  • Other equipment and materials used in the classroom

MONEY BRIEF #2

.With new stimulus payment legislation currently being debated in Congress, what will you do with any new funds you receive? According to a U.S. Census survey, the majority of people who received the previous stimulus check used most of it on household expenses, while 16% paid off debt and 14% saved it. Households with incomes between $75,000 and $99,999 were more likely to use their stimulus payments to pay off debt or add to savings. In contrast, 88% of households with incomes of $25,000 or less used their checks to meet expenses. In households that spent their stimulus funds, approximately:

  • 80% used it on food.
  • 78% paid rent, mortgage and/or utilities.
  • 58% purchased household supplies and personal care products.
  • 20% bought clothing.
  • 8% spent it on household goods like TVs, electronics, furniture and appliances, or on recreational goods like fitness equipment, toys and games.
Tax Tips for Gig Workers

Tax Tips for Gig Workers

Are you a “gig” worker?

The gig economy, or sharing or access economy, is any activity where you earn income providing on-demand work, services or goods. Often, it’s through a digital platform like an app or website. Two of the most popular types are ride-sharing (i.e., Uber and Lyft) and home rentals (i.e., VRBO and AirBnB), but there are others.

If you earn income through any type of gig work, be sure to keep these tips in mind:

  • Income from gig work is taxable. This is true whether the work is full-time, part-time or if you are paid in cash.
  • While providing gig services, you must be classified correctly. You or the business for which you are working must determine whether you are an employee or independent contractor.
  • If you are considered an employee, your employer typically withholds income taxes from your pay.
  • If you are an independent contractor, you may be required to make quarterly estimated income tax payments, plus pay your own Social Security, Medicare or Medicaid taxes.

If you have questions about paying taxes related to gig employment, please contact us. Or check out the Gig Economy Tax Center on the IRS website.

Retirement Plan Changes Due to COVID-19

If you have encountered financial hardship because of COVID-19, you may be able to withdraw up to $100,000 from your retirement plan or IRA before December 30, 2020. If you do so and are not yet age 59½, you will NOT have to pay the 10% penalty that generally applies to early distributions.

Do You Qualify?

To qualify, you must:

  • Have tested positive and been diagnosed with COVID-19, or
  • Have a dependent or spouse who has tested positive and been diagnosed with COVID-19.

You must also experience financial hardship due to you, your spouse or a member of your household:

  • Being quarantined, furloughed or laid off, or having reduced work hours.
  • Being unable to work due to lack of childcare.
  • Closing or reducing hours of a business that you own or operate.
  • Having your pay or self-employment income reduced.
  • Having a job offer rescinded or start date for a job delayed.

Consider All Your Options

While you may not pay a penalty, keep in mind that any distribution you take is still subject to regular income tax — but you can stretch the reporting on your tax returns over a three-year period. Note, however, that you must also repay the distribution to your retirement plan or IRA within three years. So it’s important to consider all your options before choosing to withdraw your retirement funds early.

Give us a call if you’d like some guidance on the best way to proceed for your situation.

MONEY BRIEF #1

Beginning this tax year, there is a new Form 1099-NEC: Nonemployee Compensation for business taxpayers who pay or receive nonemployee compensation. Payers must complete this form to report any payment of $600 or more in 2020 to one payee. The due date for filing the form is February 1, 2021. Note that nonemployee compensation may be subject to backup withholding if a payee has not provided a taxpayer identification number to the payer or the TIN provided was incorrect. Backup withholding can apply to most kinds of payments reported on Forms 1099 and W-2G, even though the payer doesn’t generally withhold taxes.

MONEY BRIEF #2

The SBA’s Economic Injury Disaster Loan (EIDL) Advance program, which provided grants to small businesses, closed after exhausting the $20 billion in emergency funding provided by Congress. The EIDL Advance program provided businesses with $1,000 per employee, up to a maximum of $10,000. Recipients did not have to be approved for a loan to receive Advance program funds. The funds went to nearly 6 million small businesses, including nonprofits, sole proprietors and independent contractors.

The SBA will continue to accept applications for EIDL program loans, which offer a 3.75% interest rate for small businesses and 2.75% rate for nonprofits. Businesses can apply for EIDL loans on the SBA disaster assistance page.

Note that if you receive a Paycheck Protection Program loan AND an EIDL loan, you must deduct the EIDL funding from the amount eligible for PPP loan forgiveness.

Retirement Planning: Are Your Social Security Benefits Taxable?

Retirement Planning: Are Your Social Security Benefits Taxable?

If you are retired now or planning on retiring soon, you’ll need to determine if any of your Social Security benefits will be taxed. It’s an important part of figuring your income and expenses during this time of your life.

Since 1984, Social Security beneficiaries with total incomes exceeding certain thresholds have been required to pay federal income tax on some of their benefit income. And because those income thresholds have remained unchanged while wages have increased, the proportion of beneficiaries who pay income tax has risen over time. On average, more than half of beneficiaries typically owe federal income tax on part of their Social Security benefits.

Will You Have to Pay?

Here’s how to determine if your Social Security benefits are taxable:

Add one-half of your (and your spouse’s, if married) Social Security income to all your other income, including pensions, wages, interest, dividends and capital gains.

  • If you’re single and your total added-up income equals more than $25,000, then part of your Social Security benefits may be taxable.
  • If you’re married filing jointly and your total income equals more than $32,000, then part of your Social Security benefits may be taxable.

Up to 50% of your benefits may be taxable if you are:

  • Filing single, head of household, or qualifying widow or widower with $25,000 to $34,000 income.
  • Married filing separately and lived apart from your spouse with $25,000 to $34,000 income.
  • Married filing jointly with $32,000 to $44,000 income.

Up to 85% of your benefits may be taxable if you are:

  • Filing single, head of household, or qualifying widow or widower with more than $34,000 income.
  • Married filing jointly with more than $44,000 income.
  • Married filing separately and lived apart from your spouse with more than $34,000 income.
  • Married filing separately and lived with your spouse at any time during the past year.

If you’re like most, a certain percentage of your monthly retirement, survivor and/or disability benefits is potentially taxable, depending on your income and filing status. Of course, there are a lot of other factors that go into figuring your income (and expenses) during retirement. And all of that information can help you figure out the best time for you to retire.

We’re here to help you make those important calculations — and ensure they’re correct — so you can enjoy your retirement without worrying about how to pay for it. Contact us when you’re ready.

Rollover Relief for RMDs

 

If you already took a Required Minimum Distribution (RMD) this year from certain types of retirement accounts, you can roll those funds back into your retirement account, thanks to the CARES Act. The 60-day RMD rollover period has been extended to August 31, 2020.

In addition to rollovers, this also applies if you are an IRA owner or beneficiary who has already received an RMD distribution this year. You can repay the distribution to the IRA by August 31, 2020. Further, this repayment is NOT subject to the one rollover per 12-month period limitation and the restriction on rollovers for inherited IRAs.

This relief applies if you had an RMD due in 2020 from a defined-contribution retirement plan, including a 401(k) or 403(b) plan, or an IRA. It also applies if you turned 70½ in 2019 and would have had to take your first RMD by April 1, 2020. Note that the waiver does NOT apply to defined-benefit plans.

If you have any questions about this RMD relief, please don’t hesitate to contact us.

 

MONEY BRIEF #1

The PPP loan deadline has been extended to August 8, 2020, after being signed by President Trump on Saturday. This 5-week extension re-opens the application window for the Paycheck Protection Program (PPP), keeping open a source of funding for struggling small businesses while Congress works on a second, more targeted funding program. The SBA had stopped accepting loan applications on June 30 before the extension was approved. As of June 30, the SBA had approved more than $520 billion in PPP funding, with approximately $129 billion in funds remaining available.

MONEY BRIEF #2

If you received an Economic Impact Payment, you should keep Notice 1444, Your Economic Impact Payment, with your tax records.

Notice 1444 provides details about the amount of your payment, how the payment was made and how to report any payment that wasn’t received. The IRS mailed this notice to your last known address within 15 days after sending the EIP. It’s especially important to keep this notice if you think your payment amount is wrong.

When you file your 2020 tax return, we’ll use your Notice 1444 to claim any additional credits, if you are eligible for them. Keep this notice on hand with your other important tax records, including W-2s, 1099s, and other income documents and records. Remember, you should be keeping copies of your past tax returns and supporting documents for at least three years.

New & Easier PPP Loan Forgiveness Applications Now Available

New & Easier PPP Loan Forgiveness Applications Now Available

Last week, the SBA released a revised Paycheck Protection Program (PPP) loan forgiveness application and a new EZ application. These new applications reflect the changes that were made to the PPP by the Paycheck Protection Flexibility Act of 2020, which passed on June 5.

You can access the new applications here:

Revised Application Changes

The revised PPP Loan Forgiveness Application includes several changes:

  • If you own an S corporation, you cannot include health insurance costs when calculating payroll costs; however, retirement costs are eligible.
  • Safe harbors for excluding salary and hourly wage reductions, as well as reductions in the number of employees, can be applied as of the date the loan forgiveness application is submitted. You do not have to wait until December 31 to apply for forgiveness to use the safe harbors.
  • If you received your PPP loan before June 5, you can choose between using the original eight-week covered period or the new 24-week covered period.

New EZ Application Highlights

The new 3508EZ PPP Loan Forgiveness Application requires fewer calculations and less documentation than the full application. You can use the EZ application if you:

  • Are self-employed and have no employees;
  • Did not reduce the salaries or wages of your employees by more than 25% and did not reduce the number or hours of your employees; or
  • Experienced reductions in business activity as a result of health directives related to COVID-19 and did not reduce the salaries or wages of your employees by more than 25%.

New SBA Rules Issued

The SBA also issued updated rules last week for determining payroll costs and owner compensation in calculating PPP loan forgiveness under the new 24-week period.

Employees — The original PPP legislation allowed loan forgiveness for payroll costs of up to $15,385 per employee over the eight-week period ($100,000 annualized). The new rule for the 24-week period is three times the eight-week limit for full loan forgiveness, or $46,154 per employee.

Owners — If you file Schedule C, Profit or Loss From Business, or Schedule F, Profit or Loss From Farming, your PPP forgiveness calculations have also changed. For the eight-week period, the calculation is 8 ÷ 52 × 2019 net profit, up to a maximum of $15,385. For the 24-week period, the forgiveness calculation is limited to 2.5 months (2.5 ÷ 12) of 2019 net profit, up to $20,833.

Other PPP Modifications

The SBA made a few other changes to account for the Payroll Protection Flexibility Act:

  • The minimum term for PPP loans made on or after June 5 is now 5 years. For loans made before June 5, the minimum maturity remains at 2 years unless both the borrower and the lender agree to extend it to 5 years.
  • The proportion of PPP funding that must be used on payroll costs to qualify for full forgiveness drops to 60% from 75%.
  • The application deadline for PPP loans remains at June 30.

If you have any questions about the PPP loan changes, please don’t hesitate to contact us.

Source: Journal of Accountancy

Have You Been Counted?

Fannin County is lagging behind in responses to the U.S. Census. While nearly 61.4% of all U.S. residents have responded, only 57.4% in Georgia and 35.7% in Fannin have. If you haven’t been counted yet, simply go to 2020census.gov, and fill out the easy form. The count is important so that Fannin receives its fair share in federal and state funding allocations. You can check out the response rates on this interactive map.

MONEY BRIEF

An extension to file is not an extension to pay. July 15 is the deadline to both FILE and PAY your taxes for 2019. If you need additional time, you can request an extension to FILE your taxes by October 15. However, you must still PAY any taxes due by July 15. Let us know if you need us to file an extension for you.

MONEY BRIEF

Estimated tax payments for tax year 2020, which were due April 15 and June 15, are now both due by July 15. You can visit IRS.gov/payments to pay electronically. The IRS offers two free electronic payment options where you can schedule your estimated federal tax payments up to 30 days in advance with Direct Pay, or up to 365 days in advance with the Electronic Federal Tax Payment System (EFTPS).

MONEY BRIEF

Employers may have tax credits available due to the coronavirus pandemic. To help explain the credits, the IRS created a PDF that breaks down the details of the Employer Retention Credit and the credits for paid sick and family leave. The easy-to-follow charts will help you determine whether you are eligible for the credits, the amount of the credits and which wages apply to the credits.

Good News: Positive PPP Changes Are Coming!

Good News: Positive PPP Changes Are Coming!

There’s good news if you took out a Paycheck Protection Program loan. The Paycheck Protection Program Flexibility Act — recently passed by the House & Senate and expected to be signed by President Trump — gives business owners more flexibility to use loan money and still get it forgiven.

Congress passed the legislation this week because the clock on the initial 8-week window recently expired if you were among the first PPP loan recipients. A special note in the bill clarifies that June 30 remains the deadline for applying for a PPP loan. However, the deadline for spending PPP funds is pushed back to December 31.

Key Points to Know

The bill contains several important provisions that affect borrowers:

#1 — Timeframe Increased to 24 Weeks

If you have an outstanding PPP loan, you can choose to keep the original 8-week period OR switch to the new 24-week period. Keeping the 8-week period makes sense if you have already spent the funds on sufficient expenses that provide for full forgiveness.

#2 — 75% Rule Changed to 60%

The new law changes the test that at least 75% of the amounts forgiven have to be spent on payroll expenses. Now, to be eligible to receive PPP loan forgiveness, you are required to use at least 60% of the loan amount for payroll costs, and up to 40% on rent, utilities, etc.

#3 — Workforce Reduction Rule Pushed Back to December 31

Loan forgiveness is reduced in proportion to the reduction in workforce (if the same number of employees are not hired or rehired). The new law uses the 24-week period, which extends the June 30 date to December 31.

#4 —Rehire Exception Rule Modified

There’s an exemption from the reduction in loan forgiveness if you have reduced your workforce because you could not:

  • Find Qualified Employees to Hire. You must establish an inability to rehire individuals who were employees on February 15, 2020, and an inability to hire similarly qualified employees for unfilled positions on or before December 31, 2020.
  • Restore Your Business to Full Levels of Activity. You must establish an inability to return to the same level of business activity (as of February 15, 2020) due to social distancing measures or other federal health requirements.

#5 — Repayment Period Now 5 Years

The period for repaying any PPP loans not forgiven is now 5 years (up from 2 years), while the interest rate remains at 1%.

#6 — Payroll Taxes Deferred

You are eligible to defer the payment of Social Security payroll taxes, regardless of whether you receive loan forgiveness. This allows you to defer the payment of the employer’s share (6.2%) — with 50% due in 2021 and 50% due in 2022.

Let Us Help You Figure It All Out

The new legislation is welcome news for our small businesses who need more time and flexibility to use their PPP loan funds. But it, of course, opens up new concerns, too. If you have any questions about the new legislation, please contact us and we’ll help you work through the best solutions for your situation.

Sources: CNN & Journal of Accountancy

 

 

 

MONEY BRIEF

If you have not yet reached age 59½ and need additional income during this time, you may be considering taking that money from a retirement account. The CARES Act provides an exemption on withdrawals of up to $100,000 per person from an eligible IRA or employer-provided retirement plan, such as a 401(k), 403(b) or other type of defined contribution plan.

These withdrawals are now EXEMPT from the usual 10% early withdrawal penalty, plus the 20% automatic withholding, which is used as an advance payment on the taxes that you may owe on employer-plan withdrawals.

Keep in mind that any amount you withdraw now will reduce your future retirement savings. Also, the amount will be added to your annual income for 2020 for tax purposes. The CARES Act allows you to distribute the tax burden over a period of up to three tax years, if you choose. And you can recontribute some or all of the funds that you withdrew by the third year.

Consider whether the loss of retirement savings now makes sense or not. If you’d like to work through the numbers before making any moves, give us a call.

Coming Due: PPP Loan Updates You Need to Know

Coming Due: PPP Loan Updates You Need to Know

On May 15, the SBA released its Payroll Protection Program Forgiveness Application. The Paycheck Protection Program is the forgivable loan program that allows small businesses to cover up to eight weeks of payroll costs, mortgage interest, rent and utilities. The loan amount is based on your average monthly payroll cost for 2019 multiplied by 2.5.

In order to be forgivable, at least 75% of your loan must be used for payroll costs (not including payments to independent contractors). Your forgivable amount will scale in proportion to the amount you spend on payroll, up to the total loan amount. And you must maintain the number of employees on your payroll (within certain guidelines).

Restaurant owners and other businesses have requested an extension on the eight-week forgiveness period due to extended closures. Current bi-partisan support in Congress is looking to make this change, though nothing is certain yet. If the timeline is not extended, then the portion of your loan that is not forgiven will be assessed at a 1% interest rate over 2 years, with no payments due for the first six months. There is no pre-payment penalty.

Safe Harbor Given

If you borrowed less than $2 million from the PPP, you will be given a “safe harbor.” That means that, should you be audited, you will not need to certify that your business needed the money due to economic uncertainty.

If your business borrowed more than $2 million, it may be subject to further review from the SBA. If the SBA deems that your firm lacks adequate basis for certifying that it needed the loan, the SBA will seek repayment of the loan balance and inform your lender that your loan is ineligible for forgiveness.

Tax Surprise Coming?

PPP loan recipients may be in for a tax surprise. As of now, you will NOT be able to write off expenses that would otherwise be deductible if the expenses are covered by the PPP proceeds and the loan is forgiven. That could result in a higher tax bill as you prepare to pay your first and second quarter estimated taxes, both due on July 15.

The IRS is currently blocking the deduction to prevent PPP borrowers from “double-dipping” — both exempting the PPP loan from taxes and permitting the write-off of salaries and other expenses. However, lawmakers in Congress have proposed a bill to fix the rule and allow the deductibility of expenses. The bill, the Small Business Expenses Protection Act of 2020, is currently under review in the Senate Finance Committee.

Contact Us for Help

Here at Premier CPA Services, we’re doing our best to stay on top of the constantly changing tax and financial rules — so you can make the most of these changes, keep your doors open and stay in business. If you have any questions or need guidance, please don’t hesitate to contact us. We’re here to help you, and we appreciate your business!

Are Your Important Papers Up-to-Date?

With so much going on right now, it brings to mind the need to make sure your essential documents are current and secure. Now is a good time to contact your attorney to establish or update your:

  • Will, which not only distributes your assets, but also names guardians for your children under 18.
  • Durable power of attorney for financial matters, which names someone to handle legal matters related to your finances.
  • Beneficiary designations for assets such as retirement accounts, which may be affected by the Setting Every Community Up for Retirement Enhancement (SECURE) Act.
  • Living will, which includes your healthcare wishes and considerations (i.e., medical directives and DNR orders).
  • Healthcare proxy, which authorizes another person to make medical decisions for you if you are unable to.
  • HIPAA release permitting another person to talk with medical providers about your medical history and treatment.

MONEY BRIEF #1

The IRS announced temporary changes to Section 125 Cafeteria Plans because of the Coronavirus. The IRS is offering extra flexibility to users by:

  • Extending the claims periods for you to apply unused amounts remaining in your health FSA or dependent care assistance program for expenses incurred through December 31, 2020.
  • Expanding your ability to make mid-year elections for health coverage, health FSAs and dependent care assistance programs in response to changes in needs as a result of the pandemic.
  • Applying earlier relief for high-deductible health plans to cover expenses related to COVID-19, and a temporary exemption for telehealth services retroactively to January 1, 2020.
  • Increasing (for inflation) the $500 permitted carryover amount for health FSAs to $550.

MONEY BRIEF #2

More taxpayers are using IRS.gov than ever before. As of May 8, the agency’s website had been visited a record 1 billion times — that’s up 141% compared to the same time last year.

MONEY BRIEF #3

Nearly 4 million people are receiving their Economic Impact Payment by prepaid debit card instead of a paper check or direct deposit. These EIP Visa cards are issued by MetaBank, and can be used to make purchases, get cash from ATMs or transfer funds to a personal bank account — all without fees. You can learn more at www.eipcard.com. Other EIP questions and answers can be found here: https://www.irs.gov/coronavirus/economic-impact-payment-information-center

COVID-19 Update: 3 New Tax Credits May Apply to Your Small Business

COVID-19 Update: 3 New Tax Credits May Apply to Your Small Business

The IRS has announced three new tax credits available to employers affected by the COVID-19 crisis. You may qualify for one or more of them:

Employee Retention Credit

This refundable tax credit is designed to keep employees on your payroll. It provides a credit of 50% of up to $10,000 in wages paid. The credit is available to most businesses, including tax-exempt organizations, but not state and local governments and their instrumentalities, or small businesses that have taken small business loans.

To qualify, you must fall into one of two categories:

  • Your business is fully or partially suspended by government order due to COVID-19 during the calendar quarter.
  • Your gross receipts are below 50% of the comparable quarter in 2019. Once your gross receipts go above 80% of a comparable quarter in 2019, they no longer qualify after the end of that quarter.

Paid Sick Leave Credit

This tax credit allows your business to get credit for any employee who is unable to work (including telework) due to Coronavirus quarantine or self-quarantine, or has Coronavirus symptoms and is seeking a medical diagnosis. Those employees are entitled to paid sick leave for up to 10 days (up to 80 hours) at your employee’s regular rate of pay — up to $511 per day and $5,110 in total.

Family Leave Credit

Like the Paid Sick Leave Credit, here you can receive a credit for employees who are unable to work due to caring for someone with Coronavirus or caring for a child because the child’s school or place of care is closed, or the paid childcare provider is unavailable. Those employees are entitled to paid sick leave for up to two weeks (up to 80 hours) at two-thirds (2/3) the employee’s regular rate of pay — up to $200 per day and $2,000 in total. Up to 10 weeks of qualifying leave can be counted towards the Family Leave Credit.

How to Receive the Credit

If you qualify, you are entitled to immediately receive a credit in the full amount of the required sick leave and family leave, plus related health plan expenses and your share of Medicare tax on the leave, for the period of April 1, 2020, through December 31, 2020.

You can be reimbursed for the credit by reducing your required deposits of payroll taxes that have been withheld from your employees’ wages by the amount of the credit. You must report your total qualified wages and the related health insurance costs for each quarter on your quarterly employment tax returns, or Form 941, beginning with the second quarter. If your employment tax deposits are not sufficient to cover the credit, you may receive an advance payment from the IRS by submitting Form 7200 (Advance Payment of Employer Credits Due to COVID-19).

Here for You

Please contact us if you have any questions about these new credits. The IRS has also posted Employee Retention Credit FAQs and Paid Family Leave and Sick Leave FAQs on its website to help answer your questions.

MONEY BRIEF #1

Good news! The Economic Impact Payment you may have received will NOT be counted as taxable income. It will not reduce your refund or increase the amount you owe when you file your 2020 federal income tax return.

MONEY BRIEF #2

The IRS has a new web page, Filing and Payment Deadlines Questions and Answers, to answer tax and financial relief questions most asked by self-employed taxpayers, business owners and their employees. It will be updated often to reflect latest information.

MONEY BRIEF #3

You can now request FREE credit reports — every week — if you’re feeling anxious about your financial health. To get your free reports, go to AnnualCreditReport.com. The three credit reporting agencies are making these reports free for the next year.

Retirement Plan Update: Important Changes to RMD Rules for 2020

Retirement Plan Update: Important Changes to RMD Rules for 2020

If you have an IRA or other qualified retirement plan and you are 70+, you’ll want to know about a special rule change made in response to the COVID-19 pandemic. Under the Coronavirus Aid, Relief and Economic Security (CARES) Act enacted in March, you will not have to take a Required Minimum Distribution (RMD) from your retirement account for 2020.

As a reminder, RMDs are the required withdrawal you must take from your qualified retirement plan (IRA, SIMPLE IRA or SEP IRA) each year after you reach age 70½. Note that Roth IRAs do not require withdrawals until after the death of the owner.

If you have an employer-sponsored retirement plan [e.g., defined contribution, defined benefit, 403(b) or governmental 457(b) plan], you must also begin RMDs in the year in which you reach age 70½ or the year you retire, whichever is later.

How the RMD Waiver Works

For 2020 only, Required Minimum Distributions are waived for all employer-sponsored retirement plans and IRAs, including inherited accounts. The only type of plan that the rule change does not apply to is an employer-sponsored defined-benefit plan (e.g., a traditional “pension” type plan). Here’s how the new rules work:

  • The waiver applies to RMDs due in 2020, but attributable to 2019. (If your first RMD year was 2019, and you took the RMD beforeFebruary 1, 2020, the 2020 RMD waiver does NOT apply. However, if you took the RMD between February 1 and May 15, 2020, you CAN take advantage of the 2020 RMD waiver.)
  • You do not need to meet any COVID-19 “qualifying criteria” to waive RMDs for 2020.
  • If you do not take an RMD in 2020, you will NOT be required to take two RMDs in 2021.

If you have already taken your RMD, you have the opportunity to roll it back into a retirement account should you want to. For distributions taken between Feb. 1 and May 15, 2020, the following rules apply:

  • Distributions must be rolled back into a retirement account by July 15, 2020.
  • For IRA-to-IRA rollovers, only one rollover is allowed per 12 months beginning from the day the distribution is received.
  • You can only roll over the same assets that were distributed. So, if 10 shares of XYZ company are distributed, you can only roll over up to 10 shares of XYZ company. If $5,000 in cash is distributed, you can only roll over up to $5,000 in cash.
  • Inherited and successor IRAs are not eligible to receive an IRA-to-IRA rollover; however, a spouse beneficiary can roll the assets into an IRA in their own name if the rules above are met.

Questions? We Have Answers!

With all that’s happening these days, these rules may very well change again. But for now, if you’re unsure about your RMD situation, contact us. We can help make sure the rules are followed so you are not penalized.

Stimulus Payment Update

Approximately 130 million people have received Economic Impact Payments (EIP) worth more than $200 billion in the program’s first four weeks. In Georgia alone, more than 4 million people have received nearly $7 billion in payments. The IRS has been sending out new batches of stimulus benefits every week, and is urging people to use Get My Payment by noon Wednesday, May 13, for a chance to get quicker delivery. You can check the status of your payment here.

Questions & Answers About the Paycheck Protection Program for Small Businesses

Questions & Answers About the Paycheck Protection Program for Small Businesses

We continue to receive questions from our local business owners regarding their financial relief options, particularly in regard to the Paycheck Protection Program. Established by the CARES Act, the PPP offers small businesses low-interest loans to cover payroll and other costs during the COVID-19 pandemic.

The loan, which is designed to cover 8 weeks of expenses, does not have to be paid back if at least 75% of the money is spent keeping or rehiring workers. The other 25% can be used for more payroll, rent, utilities and mortgage interest. Otherwise, it carries a 1% interest rate and must be paid back within 2 years.

While the Small Business Administration has approved more than 1.6 million loans totaling almost $350 billion since April 3rd, it has come with a host of technical glitches, an overload of applications and an exhaustion of money.

The good news is that Congress passed a new bill to replenish the PPP fund, which President Trump signed on Friday. The new law includes $310 billion in new funds, with $60 billion specifically targeted for smaller, community-based lenders and credit unions.

Following are some helpful Q&As adapted from a recent article in USA Today that we wanted to share with you:

Q: How long does it take to get a PPP loan?

A: With so many businesses applying, the SBA and banks have been overwhelmed. Some businesses have been approved for a loan in only a few hours, while others have waited several weeks … or still haven’t been approved. Once the loan is approved, however, you should receive the money within 10 days.

Note that if you’ve already applied for a loan but haven’t yet received an answer, you do NOT need to reapply. You’re already in the queue for the second round of PPP funding. But how quickly you’re approved often depends on whether your application is complete and accurate, and how your lender is prioritizing loan applications.

Click here for a sample PPP Loan Application.

Q: Why does it seem larger companies have been getting loans more quickly than smaller mom-and-pop stores?

A: Although the SBA processes the loans on a first-come, first-served basis, this requirement does not apply to lenders. So some banks have prioritized larger loans (with bigger fees) over smaller ones, and those from their “better” customers. To help address the issue, $60 billion of the new funding is scheduled to be set aside for community-based lenders, smaller banks and credit unions to assist smaller businesses.

Q: If I am self-employed or an independent contractor, am I eligible for a PPP loan?

A: Yes. Both types of workers may apply for the PPP. But in order for the loan to be forgiven, it must be tied to net profits from last year (not what you paid yourself), and not be equal to the salary you draw. Note that PPP applications for these types of workers did not start until April 10th, so you are further behind in line for loan approvals.

Q: When does the clock start running on PPP loans?

A: Immediately! The 8-week period to determine the amount of loan forgiveness begins counting on the day the money is deposited into your business bank account. So think twice about the loan if you can’t use the money right away (i.e., you don’t think you’ll be able to open in eight weeks). Payments are deferred for 6 months following the disbursement of the loan proceeds, while interest begins accruing immediately.

Q: What can I use the PPP funds for?

A: Payroll costs, healthcare benefits, mortgage interest payments, rent, utility, interest payments on debt incurred prior to February 15, 2020, and/or refinancing an SBA EIDL loan made between January 31, 2020 and April 3, 2020, all qualify. Note that you can provide raises or bonuses to your employees if you’re struggling to reach the 75% payroll threshold (as long as no worker earns more than $100,000 annually), but you cannot count independent contractors in your payroll numbers.

Q: What happens if I get a PPP loan, but still end up closing my business?

A: Due to the nature of the program, there’s no personal guarantee of collateral required. So if you have to declare bankruptcy, you should not have to repay the loan. However, if you stay in business but your sales are reduced, you will have to repay the loan.

Q: Can I apply for a PPP loan even if I’m currently making a profit?

A: Yes. The primary criteria for getting the loan is your company must have employed no more than 500 workers for whom it paid salaries and payroll taxes or paid independent contractors, and that it was operating on February 15th of this year. Loss of revenue is not a requirement, though the application form requires you to certify that “current economic uncertainty makes this loan request necessary to support the ongoing operations.”

The processes and requirements regarding the PPP can be confusing. If you need help applying or have questions about qualifying, please feel free to contact us. We’re here to help!

 

How to Make Ends Meet During the COVID-19 Crisis

How to Make Ends Meet During the COVID-19 Crisis

As the reality of sheltering in place settles in, many of our clients are asking how best to cut costs and deal with mortgage, credit card and other payments. The Consumer Financial Protection Bureau encourages financial institutions to work with their customers to meet their needs. And the U.S. Department of the Treasury recommends that banks waive ATM, overdraft, late payment and other fees as much as possible, and offer accommodations for borrowers to defer or skip some payments.

To determine your options, start by visiting your financial institution’s website and reviewing any information already posted there. Many have already established programs to assist their customers. For example, several auto insurance companies — including State Farm, Allstate, Encompass and Geico — have announced rebates or discounts for their customers, since driving has been reduced.

Mortgage Payments

If you can’t pay your mortgage or can only pay a portion, contact your mortgage servicer. The Coronavirus Aid, Relief, and Economic Security (CARES) Act provides two protections for homeowners with federally-backed mortgages:

  • A foreclosure moratorium, and
  • A right to forbearance for homeowners who are experiencing financial hardship due to the COVID-19 emergency.

If you don’t have a federally-backed mortgage, you may still find that your mortgage servicer offers relief options. If you are renting from an owner who has a federally-backed mortgage, the CARES Act provides for a suspension or moratorium on evictions. Visit the CFPB website for more details.

Student Loans

If you have a student loan held by the federal government (most Direct loans taken out since 2010, including Parent PLUS loans), your loan payments will be postponed with no interest until September 30, 2020, thanks to the CARES Act. The waiver will happen automatically — you don’t have to request it — and will be applied retroactively to March 13.

If you’re not sure what kind of loan you have, you can ask your servicer or log in to StudentAid.gov and look at your lender. If the lender is the Department of Education, then it’s a federally-held loan that is eligible for deferral. If the lender shows as Chase Bank or Sallie Mae, for example, it’s still a federal loan, but it’s not eligible for the CARES Act waiver. For these kinds of student loans, you’ll need to contact your student loan servicer directly and inquire about a forbearance or economic hardship deferment. You can also apply for an income-based repayment plan or a zero-dollar payment plan. (Visit StudentPandemicAid.com for a look at options.)

Credit Cards & Other Loans

Anticipating the need, many credit card issuers have already set up programs for customers affected by the coronavirus emergency. Visit their websites first for any information posted there, then be prepared when you call to explain:

  • Your employment situation;
  • Your current income, expenses and assets;
  • How much you can afford to pay; and
  • When you’re likely to be able to restart regular payments.

Credit Bureaus

The three main credit bureaus (Experian, Equifax and TransUnion) are also making adjustments during the crisis. For example, lenders must notify the bureaus if a customer has been placed in a special program, such as a forbearance or deferred payment plan. These programs will not hurt consumers’ credit reports. Remember that you can check your credit report for free each year at AnnualCreditReport.com.

Take Action Today

If your income is taking a hit right now, take the time to review your bills and invoices. Then set up a budget that reduces your expenses to meet your new financial reality. Cancel or pause subscriptions for things like gym memberships and season tickets. Transfer credit card balances to lower-rate cards, when possible. But most of all, contact your lenders to let them know of your financial situation. And keep in mind that it may take a while to get a customer service agent on the phone, as they’re especially busy right now.

If your income is taking a hit right now, contact your lenders to let them know of your financial situation. Keep in mind that it may take a while to get a customer service agent on the phone, as they’re especially busy right now.

CARES Act – What Does It Mean for You?

CARES Act – What Does It Mean for You?

We have received a record number of calls regarding the new Coronavirus Aid, Relief and Economic Security (CARES) Act, which President Trump signed into law on March 27, 2020. This $2 trillion economic stimulus legislation aims to provide relief for individuals and businesses that have been negatively impacted by the coronavirus outbreak. Here’s a look at some of the key provisions and how they may affect you. We’ll be happy to answer your questions as best we can — just call us at 706-632-7850 or email us.

Recovery Rebate: Taxpayers will receive a direct, one-time payment of up to $1,200 per individual (taxpayers filing jointly will receive $2,400), plus an additional $500 per child under 17. The payments will be available for those with incomes up to $75,000 for singles, $112,500 for heads of household and $150,000 for married couples, and will phase out above those amounts (by $5 for every $100 earned). The payment will be based on your 2019 tax return (2018 if you have not yet filed) to determine the amount. However, if you are eligible for a larger rebate based on your 2020 income, you will receive it in the 2020 tax-filing season. While the funds should be directly deposited into your account within 3 weeks, there are no specific details available on this yet. Some seniors and others who typically do not file returns will need to submit a simple tax return to receive the stimulus payment. (more details here)

Coronavirus Testing: All testing and potential vaccines for COVID-19 will be covered at no cost to patients.

Retirement Funds: The law waives the 10% early withdrawal penalty for distributions up to $100,000 for coronavirus-related purposes (retroactive to January 1, 2020). Withdrawals are still taxed, but taxes are spread out over three years, or you have a three-year period to repay the withdrawal. Required Minimum Distributions (RMDs) from IRAs and 401(k) plans (typically beginning at age 72) are now suspended. What’s more, the 401(k) loan limit has been increased from $50,000 to $100,000.

Charity: A new provision provides an above-the-line deduction for charitable contributions, as well as changing the limits on charitable contributions.

Unemployment: The law provides $250 billion for an extended unemployment insurance program that expands eligibility and offers workers $600 per week for four months — beyond what the State of Georgia program will pay. It also extends unemployment insurance benefits for an additional 13 weeks through December 31, 2020, after state UI benefits end for eligible workers, including the self-employed, independent contractors and gig economy workers.

Emergency SBA Loans: The Small Business Administration currently has two major loan programs in response to COVID-19. A business can apply for both the Economic Injury Disaster Loan program AND Paycheck Protection Program IF there are different use of proceeds for each program. Funds from these loans cannot be comingled. (more details here and below)

> Emergency Injury Disaster Loan (EIDL): This loan program provides small businesses with working capital loans of up to $2 million to help overcome the temporary loss of revenue. The funds cannot be used for business expansion, bonuses and other expenses that are not related to revenue shortfall from the coronavirus emergency. Small businesses and private nonprofits are also eligible to apply for an emergency advance of up to $10,000, which does not need to be repaid (even if the EIDL application is denied). The $10,000 advance will be made available within three days of application, and may be used for any regular operational business expenses related to the loss of revenue from the disaster, such as payroll, sick leave, inventory, production costs, rents or mortgages, etc. (apply here)

> Paycheck Protection Program: The law allocates $350 billion to help small businesses (fewer than 500 employees) make payroll and cover other expenses from February 15 to June 30. Small businesses may take out loans up to $10 million and can cover employees making up to $100,000 per year. Loans may be forgiven if a firm uses the loan for payroll, interest payments on mortgages, rent and utilities, and would be reduced proportionally by any reduction in employees retained compared to the prior year and a 25% or greater reduction in employee compensation. (more details here)

Additional Small Business Relief: The law allows employers to delay the payment of their portion of 2020 payroll taxes until 2021 and 2022. In addition, the 80% new operating loss rule is lifted, and losses can now be carried back five years. The excess loss limitation rules for pass-through entities are suspended. What’s more, employers can take advantage of two new refundable payroll tax credits designed to immediately and fully reimburse, dollar-for-dollar, the cost of providing coronavirus-related leave to their employees. (more details here

Answers to Your Tax Questions Amid the COVID-19 Crisis

Answers to Your Tax Questions Amid the COVID-19 Crisis

You have questions? We have answers … well, mostly we do! With all the changes to the current tax season, the IRS and the State of Georgia are constantly updating details and requirements. To help condense some of this information, we’ve answered some of the more relevant questions below.

Q: What is tax relief?

A: Both the IRS and the State of Georgia have announced an automatic delay in the tax-filing and tax-payment deadline — from April 15, 2020, to July 15, 2020. You do not have to file an extension for this. You must just file and pay any tax due with your return no later than July 15.

Q: Who is eligible?

A: The extended deadline applies to individuals, trusts, estates, corporations and other types of business entities that normally have a federal income tax return or payment due on April 15, 2020. It does not apply to federal income tax returns and payments due on any other date. Note that this does apply to both 2019 federal and state income tax payments (including payments of tax on self-employment income) AND 2020 estimated federal and state income tax payments (including on self-employment income).

Q: Can I still file an extension for a due date AFTER July 15, 2020?

A: Yes, you can request an extension by filing Form 4868 (businesses and trusts file Form 7004) by July 15, 2020. In this case, your tax return will be due on October 15, 2020. To avoid interest and penalties when filing your tax return after July 15, 2020, however, you must pay any estimated tax due by July 15.

Q: What if I already filed my 2019 income tax return?

A: If you have already filed and owe taxes, then you must pay your taxes in full by July 15, 2020. Interest and penalties will begin to be charged after July 15 for any amount remaining unpaid by that date. If you have already scheduled a payment for April 15, 2020, note that the payment will not be automatically rescheduled unless you change it. There are several ways to do this depending on how you scheduled the payment. Please contact us for assistance.

Q: Do I have more time to contribute money to my IRA for 2019?

A: Yes. Because the due date for filing federal income tax returns has been postponed to July 15, the deadline for making contributions to your IRA for 2019 is also extended to July 15, 2020.

Q: How are payroll, excise and other taxes affected?

A: Normal filing, payment and deposit due dates continue to apply to both federal payroll and excise taxes. In Georgia, no extension is provided for the filing, payment or deposit of any other type of state tax (including employee withholding and sales tax), or for the filing of any state information returns.

However, all Georgia vehicle registrations that expire between March 16, 2020, and May 14, 2020, have been extended through May 15, 2020. This extension applies to all annual registrations, including personal passenger vehicles, commercial vehicles, vehicles registered in the International Registration Plan (IRP), and Temporary Operating Permits (TOPs) issued at the time of a vehicle purchase.

Q: How are 1st and 2nd quarter 2020 estimated tax payments handled?

A: First quarter 2020 estimated tax payments normally due on April 15, 2020, may be postponed until July 15, 2020 (if needed). However, second quarter 2020 estimated income tax payments are still due on June 15, 2020. Only first quarter 2020 estimated income tax payments are currently postponed.

As you can imagine, there is still much confusion regarding the tax changes related to the COVID-19 pandemic. We’re here to help — please feel free to email Jackie or give us a call at 706-632-7850 with your questions.

And remember, we will continue to work on tax returns in the order they are received. While our previous drop-off deadlines no longer apply, we still encourage you to provide us with your paperwork as soon as you are able, especially if you are expecting a refund. You do NOT have to come inside our office to give us your paperwork. You may email it to us or simply drop it in our dropbox outside our office.