Dear Valued Clients, Colleagues and Friends:
Applied Tax Resource Group has prepared this guide to help answer your basic questions about updates to the 2019 tax season as well as available support to businesses and families. We understand that there are many new developments. Be assured that we are monitoring these items and will apply the relevant changes to your personal situation. Please review this information below for clarification regarding your specific circumstances.
- Rebate of $1,200 for an individual, $2,400 for a married couple. Plus $500 per eligible child
- To be eligible for the full rebate, an individual must have less than $75,000 in income. A reduced rebate will be given to an individual whose income is between $75,000 and $99,000
- To be eligible for the full rebate, a married couple must have less than $150,000 in income. A reduced rebate will be given to an individual whose income is between $150,000 and $198,000
- Rebate will be based on the 2019 tax return if it has been filed. If a 2019 return has not been filed then it will be based on the 2018 tax return.
- Eligible child is a child under the age of 17. There will be no credit for “adult” dependents. An adult dependent includes a parent who is a dependent of their child and also includes a child who is 17 or older (including college students).
- A person who is a dependent of another person is not eligible for the rebate. This includes a child who is 17 or older and who is a dependent on his/her parent’s tax return.
- If your 2018 and 2019 income are too high to qualify for the rebate but your 2020 income decreases so that you are below the income threshold, then you will be eligible for the rebate when you file your 2020 tax return
- It is expected that rebates will take about three weeks to start arriving via direct deposit and could take up to six weeks for those taxpayers that have to be mailed a check.
Filing Date Deadlines and Payment Date Deadline
- Unemployment benefits will be increased in the amount of $600 on top of base (regular) amount
- Unemployment benefits will be extended by 13 weeks
- You can take up to $100,000 out of your retirement plan without penalty. Tax on the withdrawal will still apply but can be paid over three years. You will have up to three years to recontribute any funds taken out
- Required Minimum Distributions are waived for 2020.
- The deadline for funding your 2019 IRA and HSA has been delayed to 7/15/2020
- The IRS has delayed the deadline for filing 2019 individual tax returns to 7/15/2020
- The IRS has delayed the deadline for paying any balance due on 2019 tax returns to 7/15/2020
- The IRS has delayed the deadline for paying 2020 Q1 estimated tax payments to 7/15/2020
- As of now, the IRS deadline for paying 2020 Q2 estimated tax payments remains 6/15/2020. We will let you know if this changes.
- The California Franchise Tax Board (FTB) has delayed the deadline for filing 2019 tax returns to 7/15/2020
- The FTB has delayed the deadline for paying 2019 tax return balance due, 2020 Q1 estimated tax payments and 2020 Q2 estimated tax payments to 7/15/2020
- Arizona Department of revenue has delayed the filing deadline for 2019 tax returns and the 2019 balance due payment deadline to 7/15/2020
- As of now, it appears that Arizona 2020 estimated tax payments are still due based on the regular payment schedule of 4/15/2020, 6/15/2020, 9/15/2020 and 12/15/2020.
- Other states may have also delayed filing and payment deadlines
Payroll tax deferral. Employers can defer the employer payroll tax deposits for 2020. 50% of the deferred payroll tax will be due on 12/31/2021 and 50% will be due on 12/31/2022. Note that only the employer portion of the social security tax is eligible for deferral. The employer portion of Medicare tax is not eligible for deferral. Also, the employee payroll taxes (federal withholding, social security withholding and Medicare withholding) are not eligible for deferral. Please contact your payroll service company regarding how to elect this deferral.
Employee retention credit. A refundable employee retention credit equal to 50% of qualified wages against quarterly employment taxes, up to $10,000 of wages per employee. This credit is for employers whose operations are fully or partially suspended due to a Covid-19 shutdown order and who continue to pay employees. It is also available to employers whose gross receipts declined by more than 50% compared to same quarter in 2019.
Net operating losses arising in 2018, 2019 or 2020 can be carried back five years.
Emergency Paid Sick Leave. If an employee is unable to work due to Covid-19, the employer must provide up to 80 hours of paid sick time. See last week’s email for more detail. With certain limits, payroll tax credits are available for amounts paid for the sick leave. Employees that are able to tele-work (work from home) are not eligible for emergency sick leave. Employers that have fewer than 50 employees may apply for an exemption.
Emergency Family Leave. An employee who is unable to work due to caring for a child whose school or place of care has been closed due to Covid-19 is eligible for up to 12 weeks of paid family leave. With certain limits, payroll tax credits are available for the amount paid for family leave. Employees that are able to tele-work are not eligible for emergency family leave. Employers that have fewer than 50 employees may apply for an exemption.
SBA Loan Program. There will be a new SBA loan program for eligible small businesses to help fund payroll costs, health insurance premiums, rent, mortgage, utilities and interest on debt. Furthermore, a portion of these loans can be forgiven if the employer qualifies. This loan program is the “Paycheck Protection Program” See the SBA.gov Covid-19 website for details or click here for the Paycheck Protection Program details.
There is also an SBA Disaster Loan program. Click here for link directly to the SBA Disaster loan application.
Note that the Paycheck Protection Program and the SBA Disaster Loan program are two different loan programs. You will want to check out both.
California EDD Workshare. California employers who must reduce employee hours (but not entirely eliminate employee hours) may be able to sign up for the California workshare program where the EDD pays the employee for the reduction in pay. Click here for more info.
San Diego Small Business Relief Fund. If your business is in the city of San Diego, San Diego has a small business relief fund to help business retain employees. Click here for more info.
Other Cities and States. For businesses in other cities and states, click here for an article with links to other states’ relief funds.
Be assured that we will guide you as always in making informed and prudent tax decisions. Thank you for allowing us to serve your tax and planning needs.
Dean Gilger, CPA, EA, CMA