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Dear Client:

We hope that you are keeping yourself and your loved ones safe from COVID-19.   There has been a lot of information and little direction by our government officials. My intention is to get you the information you need as soon as it comes out.  I will be providing you more information regarding processes for the SBA loan/grant as it becomes available.)

On a personal note, this is just Week Two of working from home and I applaud each and everyone of you who are doing the same.  Since December, in anticipation of this pandemic, we have been working on our home office processes, updating our systems,  practicing our individual capabilities, and working with our vendors to augment any shortcomings.  Putting this into practice has been challenging with the stress of unfamiliar roles – keeping our families safe, homeschooling and childcare, providing emotional support, and navigating the daily challenges of this pandemic’s grip.  Please understand that your taxes may not get done as quickly and efficiently as before, and returning phone calls and emails may take a bit longer.

Please rest assured that the quality of our service remains our top priority and we will work diligently get you the information you need to help you and your businesses stay financially healthy with any tax and government sponsored programs that are available.

On March 30th, the Treasury Secretary said he hopes that they will release documents and instructions later in the day covering how small businesses can apply for loans created by the coronavirus relief package.

The loan process for obtaining the loans will be “very simple,” and that small-business owners will be able to go to existing Small Business Administration lenders as well as banks, credit unions and financial technology lenders to apply.

I expect this to be very easy.

Please contact your bank that you bank with or borrow money with.  They will be on the front line with this process.

We are also here to help in providing you with the necessary information that will be needed.

The Treasury secretary expects that the loans to be available starting on Friday.

The new coronavirus relief law creates a $350 billion program that allows small business owners to apply for loans that would be forgiven if they hire or retain their workers.

The loans are designed to cover eight weeks of a business’s payroll, and a business can receive a loan of up to $10 million under the program.

This is a very effective way to keep people at work so that when the economy opens up, they’re ready, and small businesses have their employees and are open for business,” he said.

I also feel that the administration will ask Congress for additional funds if the program proves to be popular and funds for it run out.

 

Recovery rebates for individuals.

  • To help you stay afloat during this time of economic uncertainty, the government will send up to $1,200 payments to eligible taxpayers and $2,400 for married couples filing joints returns. An additional $500 additional payment will be sent to taxpayers for each qualifying child dependent under age 17.
  • Rebates are gradually phased out, at a rate of 5% of the individual’s adjusted gross income over $75,000 (singles or marrieds filing separately), $122,500 (head of household), and $150,000 (joint). There is no income floor or ‘‘phase-in’’—all recipients who are under the phaseout threshold will receive the same amounts. Tax filers must have provided, on the relevant tax returns or other documents (see below), Social Security Numbers (SSNs) for each family member for whom a rebate is claimed.
  • The rebates will be paid out in the form of checks or direct deposits. Most individuals won’t have to take any action to receive a rebate. IRS will compute the rebate based on a taxpayer’s tax year 2019 return (or tax year 2018, if no 2019 return has yet been filed). If no 2018 return has been filed, IRS will use information for 2019 provided in Form SSA-1099, Social Security Benefit Statement, or Form RRB-1099, Social Security Equivalent Benefit Statement.
  • Rebates are payable whether or not tax is owed. Thus, individuals who had little or no income, such as those who filed returns simply to claim the refundable earned income credit or child tax credit, qualify for a rebate.

Waiver of 10% early distribution penalty. The additional 10% tax on early distributions from IRAs and defined contribution plans (such as 401(k) plans) is waived for distributions made between January 1 and December 31, 2020 by a person who (or whose family) is infected with the Coronavirus or who is economically harmed by the Coronavirus (a qualified individual). Penalty-free distributions are limited to $100,000.  Income arising from the distributions is spread out over three years unless the employee elects to turn down the spread out.

Waiver of required distribution rules. Required minimum distributions that otherwise would have to be made in 2020 from defined contribution plans (such as 401(k) plans) and IRAs are waived. This includes distributions that would have been required by April 1, 2020, due to the account owner’s having turned age 70 1/2 in 2019.

Charitable deduction liberalizations. The CARES Act makes four significant liberalizations to the rules governing charitable deductions:

  • Individuals will be able to claim a $300 above-the-line deduction for cash contributions made, generally, to public charities in 2020. This rule effectively allows a limited charitable deduction to taxpayers

Exclusion for employer payments of student loans. An employee currently may exclude $5,250 from income for benefits from an employer-sponsored educational assistance program. The CARES Act expands the definition of expenses qualifying for the exclusion to include employer payments of student loan debt made before January 1, 2021.

Break for remote care services provided by high deductible health plans.  For plan years beginning before 2021, the CARES Act allows high deductible health plans to pay for expenses for tele-health and other remote services without regard to the deductible amount for the plan.

Break for nonprescription medical products. For amounts paid after December 31, 2019, the CARES Act allows amounts paid from Health Savings Accounts and Archer Medical Savings Accounts to be treated as paid for medical care even if they aren’t paid under a prescription. And, amounts paid for menstrual care products are treated as amounts paid for medical care. For reimbursements after December 31, 2019, the same rules apply to Flexible Spending Arrangements and Health Reimbursement Arrangements.

Business only provisions:

  • Employee retention credit for employers. Eligible employers can qualify for a refundable credit against, generally, the employer’s 6.2% portion of the Social Security (OASDI) payroll tax (or against the Railroad Retirement tax) for 50% of certain wages (below) paid to employees during the COVID-19 crisis.

The credit is available to employers carrying on business during 2020, including non-profits (but not government entities), whose operations for a calendar quarter have been fully or partially suspended as a result of a government order limiting commerce, travel or group meetings. The credit is also available to employers who have experienced a more than 50% reduction in quarterly receipts, measured on a year-over-year basis relative to the corresponding 2019 quarter, with the eligible quarters continuing until the quarter after there is a quarter in which receipts are greater than 80% of the receipts for the corresponding 2019 quarter.

For employers with 100 or fewer full-time employees in 2019, all employee wages are eligible, even if employees haven’t been prevented from providing services. The credit is provided for wages and compensation, including health benefits, and is provided for the first $10,000 in eligible wages and compensation paid by the employer to an employee. Thus, the credit is a maximum $5,000 per employee.

The IRS has authority to advance payments to eligible employers and to waive penalties for employers who do not deposit applicable payroll taxes in reasonable anticipation of receiving the credit. The credit is not available to employers receiving Small Business Interruption Loans. The credit is provided for wages paid after March 12, 2020 through December 31, 2020.

  • Delayed payment of employer payroll taxes. Taxpayers (including self-employeds) will be able to defer paying the employer portion of certain payroll taxes through the end of 2020, with all 2020 deferred amounts due in two equal installments, one at the end of 2021, the other at the end of 2022. Taxes that can be deferred include the 6.2% employer portion of the Social Security (OASDI) payroll tax. The relief isn’t available if the taxpayer has had debt forgiveness under the CARES Act for certain loans under the Small Business Act as modified by the CARES Act (see below). For self-employeds, the deferral applies to 50% of the Self-Employment Contributions Act tax liability (including any related estimated tax liability).
  • Net operating loss liberalizations. For NOLs arising in tax years beginning before 2021, the CARES Act allows taxpayers to carryback 100% of NOLs to the prior five tax years, effectively delaying for carrybacks the 80% taxable income limitation and carryback prohibition until 2021.

The Act also temporarily liberalizes the treatment of NOL carryforwards. For tax years beginning before 2021, taxpayers can take an NOL deduction equal to 100% of taxable income (rather than the present 80% limit). For tax years beginning after 2021, taxpayers will be eligible for: (1) a 100% deduction of NOLs arising in tax years before 2018, and (2) a deduction limited to 80% of taxable income for NOLs arising in tax years after 2017.

  • Deferral of noncorporate taxpayer loss limits.  The CARES Act retroactively turns off the excess active business loss limitation rule by deferring its effective date to tax years beginning after December 31, 2020 (rather than December 31, 2017). (Under the rule, active net business losses in excess of $250,000 ($500,000 for joint filers) are disallowed by the 2017 Tax Law and were treated as NOL carryforwards in the following tax year.)

The CARES Act clarifies, in a technical amendment that is retroactive, that an excess loss is treated as part of any net operating loss for the year, but isn’t automatically carried forward to the next year. Another technical amendment clarifies that excess business losses do not include any deduction (NOL deduction) or (qualified business income deduction).

Still another technical amendment clarifies that business deductions and income don’t include any deductions, gross income or gain attributable to performing services as an employee. And because capital losses of non-corporations cannot offset ordinary income under the NOL rules, capital loss deductions are not taken into account in computing the loss and the amount of capital gain taken into account cannot exceed the lesser of capital gain net income from a trade or business or capital gain net income.

  • Technical correction to restore faster write-offs for interior building improvements. The CARES Act makes a technical correction to the 2017 Tax Law that retroactively treats (1) a wide variety of interior, non-load-bearing building improvements (qualified improvement property (QIP)) as eligible for bonus deprecation (and hence a 100% write-off) or for treatment as 15-year MACRS property or (2) if required to be treated as alternative depreciation system property, as eligible for a write-off over 20 years. The correction of the error in the 2017 Tax Law restores the eligibility of QIP for bonus depreciation, and in giving QIP 15-year MACRS status, restores 15-year MACRS write-offs for many leasehold, restaurant and retail improvements.
  • Accelerated payment of credits for required paid sick leave and family leave. The CARES Act authorizes IRS broadly to allow employers an accelerated benefit of the paid sick leave and paid family leave credits allowed by the Families First Coronavirus Response Act by, for example, not requiring deposits of payroll taxes in the amount of credits earned.
  • Pension funding delay. The CARES Act gives single employer pension plan companies more time to meet their funding obligations by delaying the due date for any contribution otherwise due during 2020 until January 1, 2021. At that time, contributions due earlier will be due with interest. Also, a plan can treat its status for benefit restrictions as of December 31, 2019 as applying throughout 2020.
  • Certain SBA loan debt forgiveness isn’t taxable. Amounts of Small Business Administration Section 7(a)(36) guaranteed loans that are forgiven under the CARES Act aren’t taxable as discharge of indebtedness income if the forgiven amounts are used for one of several permitted purposes. The loans have to be made during the period beginning on February 15, 2020 and ending on June 30, 2020.

IRS information site. Ongoing information on the IRS and tax legislation response to COVID- 19 can be found at  https://www.irs.gov/coronavirus.

I will be pleased to hear from you at any time with questions about the above information or any other matters, related to COVID-19 or not.

 

 

Unemployment Resources

The Department of Labor issued guidance to the states instructing state agencies to apply existing law flexibly.

Under the DOL guidance, DUA may now pay unemployment benefits if a worker is quarantined due to an order by a civil authority or medical professional or leaves employment due to reasonable risk of exposure or infection or to care for a family member and does not intend to or is not allowed to return to work. The worker need not provide medical documentation and need only be available for work when and as able.

To assist individuals who cannot work due to the impact of COVID-19, the Administration is filing emergency legislation that will allow new claims to be paid more quickly by waiving the one week waiting period for unemployment benefits.

EOLWD and DUA are also filing emergency regulations that will allow people impacted by COVID-19 to collect unemployment in the following circumstances:

  • The workplace is shut down and expects to reopen in four or fewer weeks. Workers must remain in contact with their employer and be available for any work their employer may have for them that they are able to do, but do not otherwise need to be looking for work.
  • An employer may extend the period of the shut-down to eight weeks, and the employees will remain eligible for the longer period under the same conditions described above.
  • If necessary, DUA may extend these time periods.

Employers who are impacted by COVID-19 may request up to a 60-day grace period to file quarterly reports and pay contributions.

The pending federal legislation proposes further relief including additional money for unemployment benefits, and relief to employers for charges related to unemployment benefits paid due to COVID-19.

https://www.mass.gov/info-details/covid-19-guidance-and-directives

 

LOANS

Recent legislation has set aside $1 billion to the SBA that has been allotted to subsidize disaster relief loans for small businesses, nonprofits, and agricultural cooperatives experiencing economic hardship after the coronavirus pandemic. Loans can be as high as $2 million.

I am hearing from our clients and business who are concerned that the COVID 19 disruptions are having and a major impact on their small business. I want our Dennis & Associates businesses to be first in line when SBA begins processing loan applications related to the coronavirus situation.    Start immediately collecting the information needed to apply for these loans.

 

Things you will need with be tax returns from recent years and balance sheets.

We will have the ability to email to you your tax returns when they are needed.

 

Below is the SBA news release as of 3/12/20.

 

https://www.sba.gov/about-sba/sba-newsroom/press-releases-media-advisories/sba-provide-disaster-assistance-loans-small-businesses-impacted-coronavirus-covid-19

 

https://www.sba.gov/page/guidance-businesses-employers-plan-respond-coronavirus-disease-2019-covid-19

 

 

 

 


Based in Quincy, MA, Dennis & Associates, CPA’s is more than an accounting office — we are your partner in building success for your business. From tax services and financial reporting to complete business management and development services, we provide comprehensive solutions for clients across the area. We take a proactive, realistic approach with each client to ensure they are able to meet and exceed their goals for their company.

Our firm specializes in assisting closely held, family-owned businesses within our community and surrounding areas. We are focused on helping our clients create financially stable, successful businesses. Our team is experienced, knowledgeable, and committed to helping each client find the solutions they deserve. We focus on building lifelong client and employee relationships based on teamwork, respect, and mutual confidence.

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Please contact your bank that you bank with or borrow money with. 

On March 30th, the Treasury Secretary said he hopes that they will release documents and instructions later in the day covering how small businesses can apply for loans created by the coronavirus relief package. The loan process for obtaining the loans will be “very simple,” and that small-business owners will be able to go to existing Small […]

Message to our Clients

Dear Client: Right now, your highest priority is the health of those you love and yourself. But if you have time to read about some non-medical but important matters related to the health crisis, here is a summary of IRS action already taken and federal tax legislation already enacted to ease tax compliance burdens and […]

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David DennisCertified CPA