As the coronavirus (COVID-19) continues to affect 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. We’re providing a high-level summary of some of the key provisions impacting individuals and businesses.
Our firm remains open and available to serve you. Whether you have tax or financial planning questions or need advice on ways to navigate the expanded benefits, we’re here for you. If you have any questions or concerns, please don’t hesitate to contact us.
During this unpredictable and challenging time, it’s more important than ever to stay connected. We’re in this together and our thoughts go out to all that have been impacted by this unprecedented situation. Rest assured, we’re here to help with your questions.
Income Tax Provisions:
The IRS has provided broad relief and extended the filing and payment deadlines to July 15, 2020. However, we continue to work on filing returns as soon as possible.
Estimated tax payments due on or after April 1, 2020 and before July 15, 2020 can wait until July 15 to make the payment without penalty.
Payments to individuals of $1,200 ($2,400 for joint filers) plus $500 for each qualifying child are expected to be delivered if you have not received the payment yet;
The recovery rebate begins to phase out for taxpayers with adjusted gross income (AGI) above $150,000 for joint filers, $112,500 for heads of households and $75,000 for other individuals
The payment is not taxable.
Through the end of the year, individuals who are under 59 ½ years old can take up to $100,000 in coronavirus-related distributions from retirement plans without the usual 10% penalty for early distributions. The distributions may be repaid within three years and any resulting income inclusion can be taken over three years.
If you were over 70 ½ at Dec. 31, 2019 you won’t have to take required minimum distributions (RMD) in 2020. If your retirement assets have taken a hit, not having to take an RMD may allow those assets to recover some value before you liquidate them.
If you have a federally-held student loan, your payments will be suspended through Sept. 30, 2020 and interest won’t accrue during this period. Note that this relief does not apply to private student loans.
Employee Retention and Payroll Tax Credits:
A refundable tax credit has been created to assist employers in retaining employees. The credit is computed at 50% of qualified wages paid by eligible employers for up to $10,000 paid to each employee between March 13, 2020 and Dec. 31, 2020.
Subject to limitations and exceptions, employers of less than 500 employees are required to provide mandatory sick time and paid family leave but are eligible for payroll tax credits to offset the costs. Eligible self-employed individuals also qualify for the credits. Healthcare providers and emergency responders are excluded; employers with fewer than 50 employees can be exempted.
Employers (including self-employed individuals) will be able to postpone the employer’s share of Social Security taxes through the end of this year. The delayed payments are due in two equal payments, one due Dec. 31, 2021 and the second due Dec. 31, 2022.
Small Business Administration (SBA) Loans:
EIDL – Small businesses are eligible to apply for an Economic Injury Disaster Loan grant of up to $10,000. This is considered a grant and will not have to be repaid.
Payroll Protection Program (PPP) – This program is designed to help provide capital to cover the cost of retaining employees. If certain criteria are met, the loan can be forgiven.
Other business provisions
Many businesses are facing losses due to the economic impacts from the pandemic. For losses arising in tax years 2018, 2019 and 2020, a five-year carryback (NOL Carryback) is now allowed to help businesses recoup some of their prior taxes.
Interest expense deduction limitations has been increased to 50% for tax years 2019 and 2020
Depreciation modifications were made in connection with qualified improvement property to allow for a faster write-off of these assets. Under the recent legislation, this depreciation period has been reduced to 15 years, and these assets will now be eligible for bonus depreciation which will allow for an immediate deduction of the entire cost of the property.