Monthly Archives: April 2020

Not All Businesses Will Recover

TooJay’s Deli Files for Bankruptcy

South Florida-based TooJay’s deli files for Chapter 11 bankruptcy; is this just the first of what is going to be a tsunami of bankruptcy filings to come? Will your company or employer be added to the list? No one ever wants to declare bankruptcy but it happens.

If you are a business owner, how do you stop your company from being added to the list of those filing for bankruptcy? Now is the time to start thinking about how you can reduce your expenses and preserve your cash so that you can survive the upcoming hard times. Survival almost always means being quick to adapt and keeping your eyes on two important things: your CASH and your Accounts Receivable.

Cash is the fuel required to keep your doors open, pay your employees, rent, and operating expenses. While accounts receivable is nothing more than future cashflow that is at risk.

At risk means that it’s something someone else can destroy – if you don’t control it. Make your credit policy too tight and you will lose sales and growth, but make it too loose and you end up with sales that you never collect payment on. Uncollected sales mean not only do you lose the cash you can’t collect, you also lose the cash expended to make the sale and the cash expended to purchase the goods sold.

Customers that have been good payers for years could be running into trouble through no fault of their own. The important thing is to prevent their trouble from becoming your trouble.

What can you do? Review the list of customers you extend credit too. Reevaluate their ability to meet their commitments, watch the balances of credit accounts, and be sure to cut them off early, as soon as they become delinquent. Keep in touch with those that owe you money and remember getting something now beats getting nothing later. When possible offer alternative payment terms, like payment by credit card.

Preserve your cash. Review expenses to see what recurring expenses can be eliminated. Check your credit card bills for services that automatically bill each month and are no longer used. Reduce the number of telephone lines, and eliminate services you don’t need like cable TV, window cleaners and other services that lower sales mean you can do in house.

Make a plan to protect your assets so that should things go down hill you are not left with nothing to show for many years of hard work. Talk to your accountant and your attorney about how to best protect your personal assets, and remember a business is not a ship, and in business the Capitan does not have to go down with the business. Be sure to save a spot on the lifeboat so if necessary you have the resources to start over.

IRS Employee Recall Begins

IRS recalls employee. Effective April 27th 2020 the IRS began recalling certain employees in mission-critical functions. We are hopeful this means that the IRS will again begin processing Powers of Attorney and other documents submitted as well as responding to transcript requests.

The IRS Human Capital Officer is instructing employees returning to work that, face coverings to be required in IRS facilities and workspaces.

Click here for a full copy of the memo from the IRS Human Capital Officer.

Economic Impact Payment Check Mailing Schedule


The IRS Says “The Check Is In The Mail” or Will Be

If you did not get a direct deposit and are still entitled to an Economic Impact Payment the check is in the mail or will be. The IRS says that paper checks will be mailed as follows, based on the AGI (Adjusted Gross Income) show on your 2019 return if filed. If your 2019 return has not been files then they will base the mailing on your 2018 AGI:

• People with up to $10,000 in AGI: the week ending April 24.
• Between $10,000 AGI and $20,000 AGI: the week ending May 1.
• Between $20,000 AGI and $30,000 AGI: the week ending May 8.
• Between $30,000 AGI and $40,000 AGI: the week ending May 15.
• Between $40,000 AGI and $50,000 AGI: the week ending May 22.
• Between $50,000 AGI and $60,000 AGI: the week ending May 29.
• Between $60,000 AGI and $70,000 AGI: the week ending June 5.
• Between $70,000 AGI and $80,000 AGI: the week ending June 12.
• Between $80,000 AGI and $90,000 AGI: the week ending June 19.
• Between $90,000 AGI and $100,000 AGI: the week ending June 26.
• Between $100,000 AGI and $110,000 AGI: the week ending July 3.
• Between $110,000 AGI and $120,000 AGI: the week ending July 10.
• Between $120,000 AGI and $130,000 AGI: the week ending July 17.
• Between $130,000 AGI and $140,000 AGI: the week ending July 24.
• Between $140,000 AGI and $150,000 AGI: the week ending July 31.
• Between $150,000 AGI and $160,000 AGI: the week ending Aug. 7.
• Between $160,000 AGI and $170,000 AGI: the week ending Aug. 14.
• Between $170,000 AGI and $180,000 AGI: the week ending Aug. 21.
• Between $180,000 AGI and $190,000 AGI: the week ending Aug. 28.
• Between $190,000 AGI and $198,000 AGI: the week ending Sept. 4.
• All other checks (e.g., those who didn’t have tax info on file): the week ending Sept. 11.

Remember that it may take some time after the IRS puts your check in the mail for the post office to deliver it, so patience is important.

If you don’t get the check you are entitled to there is not a lot that can be done right now as most of the IRS staff has been sent home and only a few departments are actually working, worst of all these departments will be able to answers about these checks. If the elf’s and gremlin working to get these checks out at the IRS mess-up and don’t send yours all is not lost, you will be able to file a claim for your missing payment when you file your 2020 tax return.
The information above comes from an IRS internal document published by The Washington Post.

The information above comes from an IRS internal document published by The Washington Post.

Understanding the Employee Retention Credit

The Coronavirus (COVID-19) Pandemic has caused widespread, government ordered, shutdowns of many sectors of the United States economy, which has caused extensive job loss. Over 10 million Americans filed for unemployment benefits in March and far more claims are expected in the month of April, according to the U.S. Department of Labor.

In an effort to help curb the massive layoffs that we have been seeing, Congress has created a new federal income tax credit for employers that keep their workers on the payroll, and therefore out of the unemployment lines. The tax credit amount equals 50% of eligible employee wages paid by an eligible employer in a 2020 calendar quarter. It is subject to an overall wage cap of $10,000 per eligible employee.

Wondering if your business is eligible? Here’s a breakdown of eligibility criteria:

Eligible Employers:

Forced Closure This credit is available to employers, including non-profits, whose operations have been fully or partially suspended during a 2020 calendar quarter as a result of an order from an appropriate governmental authority that limits commerce, travel, or group meetings due to COVID-19.

Decline in Receipts The credit can also be claimed by employers that have experienced a greater-than-50% decline in gross receipts for a 2020 calendar quarter. The credit is disallowed for quarters following the first calendar 2020 quarter during which gross receipts exceed 80% of gross receipts for the corresponding 2019 calendar quarter. In short, you can be eligible in one quarter of the year and ineligible in another.

Number of Employees An eligible employer must have had an average of 100 or fewer full-time employees in 2019. In this instance, all employee wages are eligible for the credit (subject to the $10k wage cap) regardless of whether employees are furloughed due to COVID-19.

The 50% employee retention credit is available to cover eligible wages paid between March 13, 2020 and December 31, 2020. The $10k cap includes allocable health plan expenses as well.

Rules and Restrictions

The 50% employee retention credit is NOT allowed for:

  • Emergency sick leave wages or emergency family leave wages that small employers (those with fewer than 500 employees) are required to pay under the Families First Coronavirus Response Act (FFCRA). Those mandatory leave payments are covered by federal payroll tax credits granted by the FFCRA.
  • Wages taken into account for purposes of claiming the pre-existing Work Opportunity Credit under Internal Revenue Code (IRC) Section 21.
  • Wages taken into account for purposes of claiming the pre-existing employer credit for paid family and medical leave under IRC Sec. 45S.

The Employee Retention Credit is NOT available for employers that receive a potentially forgivable Small Business Administration (SBA) guaranteed Small Business Interruption Loan, issued pursuant to the

The Small Business Administration (SBA) issued new guidance on PPP Loans & Public Companies

The Small Business Administration (SBA) issued new guidance today, April 23, 2020, intended to prevent larger publicly traded companies from accessing the next round of Paycheck Protection Program (PPP) funding intended for small business relief. The new SBA guidelines require that companies applying for relief certify that the loans are necessary and that they cannot tap other sources of funding.

“It is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith,” the SBA said. A key detail of the SBA’s new position is that larger public companies will be able to avoid future scrutiny by returning the relief loans within the next two weeks should they have already received funds.

To see the SBA’s
PAYCHECK PROTECTION PROGRAM LOANS
Frequently Asked Questions (FAQs)
CLICK HERE

PPP Loans Funding 4/22/20

We have seen some of the PPP loan applications we helped clients submit be successfully funded. These loans are forgivable (converted to grants) if the funds are used to maintain employee payroll. While the funds available for these loans have all been expended at the time, I am writing this, congress has just approved another $320 billion to make additional funding available. If you are a small business that has not yet applied for one of these loans and have payroll, now is the time to get your ducks in a row so that you can submit your loan documents before this new funding runs out. For more information on these loans see the “Coronavirus (COVID-19) Information” on our website.

Nobody is Home at the IRS

 

While the IRS is not closed, most of the staff have been sent home. Other than a few departments, not a lot is functioning right now.

Currently still working are: most of the electronic services, including the acceptance of E-Filed Returns, the electronic Transcript Delivery System (as long as we already have a Power of Attorney for you on file), and the Get Transcript for individuals that have an account set-up, or are able to meet the verification requirements (which includes having a cell phone reported in your name). There are only two departments that are staffed: ACS (Automated Collections Service), this is the department that sends those annoying collection notices, and the local Tax Payer Advocates, who are working from home.

On the bright side, most collections matters are currently on hold until July 15th. However, if you have a garnishment in place or an automated payment plan, these have not been affected by the IRS shutdown. If you have one of these and you are experiencing a hardship due to COVID-19, you will need to contact your employer or bank about suspending the payment until July 15th.

The IRS is not processing any paper returns, paper forms or mail. These things are just piling up and with any luck will be processed when employees return to work. This means we, as tax professionals, can’t submit new Powers of Attorney and get information to help taxpayers get compliant. Banks can’t get verification of taxes and payments when processing mortgage applications and those waiting for answers to tax problems and IRS correspondence will just have to wait.

I also may mean some Economic Disaster payments are delayed for those that choose to submit paper returns.

The one thing you can depend on is that we are working and happy to assist you should you need help.

What happens if I don’t get my Economic Impact Payment?

The payments being sent out or direct deposited by the IRS to your bank account are an advance on a credit that will be reconciled when you file your 2020 tax return. The CARES Act grants individuals with Adjusted Gross Income (AGI) of less than $75,000 and married couples with AGI of less than $150,000 a refundable credit of $1,200 for singles and $2,400 for married couples. An additional credit of $500 is allowed for each qualifying child of the taxpayer.

For purposes of the credit, an “eligible individual” is any individual other than a non-resident alien OR an individual for whom a dependency deduction is allowable to another taxpayer for the tax year.

The amount of the credit is reduced (but not below zero) by 5% of the taxpayer’s adjusted gross income (AGI) in excess of: (1) $150,000 for a joint return, (2) $112,500 for a head of household, and (3) $75,000 for all other taxpayers.

The stimulus payment currently being sent out by the IRS is an advance of these refundable credits. 

If you do not receive a payment as an advance stimulus payment OR if you do not receive the correct amount this will be dealt with when you file your 2020 federal income tax return.

The amount of any credit due on your 2020 tax return is reduced, but not below zero, by the amount of advanced credit you received. This means if you got a credit of $1200 based on your 2019 AGI but are not entitled to the credit based on your 2020 income you will NOT have to repay any excess payments received.

If you did not get a payment based on your 2018 or 2019 income tax returns but do qualify based on the income reported on your 2020 return any additional amount you qualify for will be paid after you file your 2020 tax return.

What does all this mean to you? It boils down to this: if you don’t get a payment you are going to have to wait until you file your 2020 return to get your payment. So, if you are entitled you will get your payment is just might take a while. If you do get the advanced credit and get too much, you get to keep what you got and not have to repay it.

Employee Retention Credit CARES Act

Employer Payroll Credits

New law. This provision provides a refundable payroll tax credit for 50% of wages paid by eligible employers to certain employees during the COVID-19 crisis.

Eligible employers. The credit is available to employers, including non-profits, whose operations have been fully or partially suspended as a result of a government order limiting commerce, travel, or group meetings. The credit is also provided to employers who have experienced a greater than 50% reduction in quarterly receipts, measured on a year-over-year basis. When the employer’s gross receipts exceed 80% of the comparable quarter in 2019, the employer no longer qualifies for the credit at the end of that quarter.

The credit is not available to employers receiving Small Business Interruption Loans (payroll protection loans) or to self-employed individuals.

Wages paid to which employees? For employers who had an average number of full-time employees in 2019 of 100 or fewer, all employee wages are eligible, regardless of whether the employee is furloughed. For employers who had a larger average number of full-time employees in 2019, only the wages of employees who are furloughed or face reduced hours as a result of their employers’ closure or reduced gross receipts are eligible for the credit.

No credit is available with respect to an employee for any period for which the employer is allowed a Work Opportunity Credit with respect to the employee.

Wages. The term “wages” includes health benefits and is capped at the first $10,000 in wages paid by the employer to an eligible employee.

Wages do not include amounts taken into account for purposes of the payroll credits, for required paid sick leave or required paid family leave in the Families First Coronavirus Act. Wages taken into account for this credit are not taken into account for the Code Sec. 45S employer credit for paid family and medical leave.

Refunds and Advance Payments. IRS can advance payments to eligible employers, if the amount of the credit for any calendar quarter exceeds the applicable payroll taxes, the employer can claim a refund of the excess on its federal employment tax return. In anticipation of receiving the credits, employers can also fund qualified wages by accessing federal employment taxes, including withheld taxes, that are required to be deposited with the IRS or by requesting an advance of the credit from the IRS on Form 7200.

Waiver of penalties. IRS can waive applicable penalties for employers who do not deposit applicable payroll taxes in anticipation of receiving the credit.

Effective date. The credit applies to wages paid after Mar. 12, 2020 and before Jan. 1, 2021.

Source Thomson Reuters/Tax & Accounting

IRA Early Distribution Penalty Suspended

10% Early Distribution Penalty Suspended on Coronavirus-related IRAs & Qualified Plan Distributions

The CARES Act provides that the 10% additional tax on distributions to those under 59.5, does not apply to coronavirus-related distributions, up to $100,000.

A qualified individual must meet ONE of the following criteria:

(1) is an individual who is diagnosed with the virus SARS-CoV-2 or with coronavirus disease 2019 (COVID-19) by a test approved by the Centers for Disease Control and Prevention (CDC)

(2) whose spouse or dependent is diagnosed with such virus or disease by such a test

(3) who experiences adverse financial consequences as a result of being quarantined, being furloughed or laid off or having work hours reduced due to such virus or disease, being unable to work due to lack of child care due to such virus or disease, closing or reducing hours of a business owned or operated by the individual due to such virus or disease, or other factors as determined by the Secretary of the Treasury. This would cover those with reduced work hours due to stay at home orders and well as those with additional costs due to stay at home orders.

On a side note, one should consider carefully the consequences of taking early distributions from IRA or retirement plans, as these funds are intended to grow for one’s future retirement and in Florida, these funds are also free from the claims of creditors as long as they remain in the IRA or plan. Taking funds out of a plan could subject those funds to claims made by current or future creditors.